Caterpillar vs Federal Signal: Which Stock Could Rally?
Caterpillar surged 14% during the past Week. You may be tempted to buy more, or may want to reduce your exposure. But there is an entirely different perspective you might be missing. Is there a better alternative? Turns out, its peer Federal Signal gives you more. Federal Signal (FSS) stock offers superior revenue growth across key periods, better profitability, and relatively lower valuation vs Caterpillar (CAT) stock, suggesting you may be better off investing in FSS
- FSS’s quarterly revenue growth was 34.9%, vs. CAT’s 18.0%.
- In addition, its Last 12 Months revenue growth came in at 23.3%, ahead of CAT’s 4.3%.
- FSS’s LTM margin is higher: 16.7% vs. CAT’s 16.5%.
These differences become even clearer when you look at the financials side by side. The table highlights how CAT’s fundamentals stack up against those of FSS on growth, margins, momentum, and valuation multiples.
Valuation & Performance Overview
| CAT | FSS | Preferred | |
|---|---|---|---|
| Valuation | |||
| P/EBIT Ratio | 38.7 | 19.4 | FSS |
| Revenue Growth | |||
| Last Quarter | 18.0% | 34.9% | FSS |
| Last 12 Months | 4.3% | 23.3% | FSS |
| Last 3 Year Average | 4.6% | 16.5% | FSS |
| Operating Margins | |||
| Last 12 Months | 16.5% | 16.7% | FSS |
| Last 3 Year Average | 18.7% | 15.2% | CAT |
| Momentum | |||
| Last 3 Year Return | 350.9% | 140.5% | CAT |
Note: For “Last 3 Year Return” metric, preferred stock is one with higher returns unless the returns are too high (>300%) which creates risk of sell off.
See detailed fundamentals on Buy or Sell FSS Stock and Buy or Sell CAT Stock. Below we compare market return and related metrics across years.
Historical Market Performance
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Total [1] | Avg | Best | |
|---|---|---|---|---|---|---|---|---|---|
| Returns | |||||||||
| CAT Return | 16% | 19% | 26% | 25% | 60% | 59% | 449% | <=== | |
| FSS Return | 32% | 8% | 66% | 21% | 18% | 12% | 280% | ||
| S&P 500 Return | 27% | -19% | 24% | 23% | 16% | 6% | 93% | ||
| Monthly Win Rates [3] | |||||||||
| CAT Win Rate | 58% | 50% | 50% | 67% | 50% | 80% | 59% | ||
| FSS Win Rate | 58% | 50% | 50% | 50% | 42% | 40% | 48% | ||
| S&P 500 Win Rate | 75% | 42% | 67% | 75% | 67% | 60% | 64% | <=== | |
| Max Drawdowns [4] | |||||||||
| CAT Max Drawdown | -0% | -20% | -13% | -6% | -24% | 0% | -11% | ||
| FSS Max Drawdown | -2% | -26% | 0% | -6% | -25% | -3% | -10% | ||
| S&P 500 Max Drawdown | -1% | -25% | -1% | -2% | -15% | -7% | -9% | <=== | |
[1] Cumulative total returns since the beginning of 2021
[2] 2026 data is for the year up to 5/6/2026 (YTD)
[3] Win Rate = % of calendar months in which monthly returns were positive
[4] Max drawdown represents maximum peak-to-trough decline within a year
No matter how good the numbers, stock investment is never a smooth ride. There is a risk you must factor in. Read FSS Dip Buyer Analyses and CAT Dip Buyer Analyses to see how these stocks have fallen and recovered in the past.
Still not sure about CAT or FSS? Consider portfolio approach.
The Right Way To Invest Is Through Portfolios
Individual stocks can soar or tank, but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside, and mitigate the downside associated with any individual stock.
Why settle for average market returns? The Trefis High Quality (HQ) Portfolio invests in a diverse group of 30 stocks that have collectively delivered stronger upside with reduced volatility compared to the broader indices. Discover the methodology behind these smoother, higher returns by checking the HQ Portfolio performance data.