Is The Market Underpricing Caterpillar Stock?
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Caterpillar (CAT) shares lost 35.1%, counting dividends, in the six months to November 9, 2026, while the S&P 500 gained 2.4%. Following that decline, you pay 23.2 times the company’s earnings over the last twelve months, which sits close to the 23.3 average of its readings at the last twelve quarter-ends. Sales are growing again, however. What would the shares be worth if Caterpillar keeps growing its sales for three more years?
What Caterpillar Shares Could Be Worth In Three Years
Based on the assumptions below, Caterpillar shares would be worth about 60.8% more three years from now than at the November 9 close. To build this estimate, Trefis grew today’s revenue each year at 0.85 times its latest twelve-month pace and held the P/E at today’s level. The scenario sets the net margin three years out by taking 70% of today’s figure and adding 30% of its average from the previous twelve quarter-ends.
Here is how today’s figures compare with the scenario’s three years out.
| Today | In three years (scenario) | |
|---|---|---|
| Revenue | $77.8 billion | $125 billion |
| Net margin | 15.2% | 15.2% |
| Earnings | $11.8 billion | $19.0 billion |
| P/E | 23.2 | 23.2 |
| Share price | $598.88 | $962.73 |
In fiscal 2025, most of Caterpillar’s revenue growth came from Power & Energy, a division that makes large reciprocating engines and turbines. Revenue in that segment rose to $32.2 billion from $28.9 billion, while Construction Industries and Resource Industries were roughly flat. Growth broadened in the third quarter of fiscal 2026, when Construction Industries grew sales 18%, climbing as fast as Power & Energy, whose segment sales also rose 18%.
Can Caterpillar Keep Its Sales Growing This Fast?
Caterpillar has the orders, and management says adding capacity is the main limit on growth in Power & Energy. Backlog reached a record $78 billion in the third quarter of fiscal 2026, up 96% from a year earlier. In power generation, sales to users rose 75% that quarter on demand for turbines and engines used in data centers, management said. That is a retail measure, on which all of Power & Energy grew 36%.
To meet that demand, Caterpillar plans to nearly triple its large reciprocating engine capacity from the 2024 level by 2030. Management’s outlook for fiscal 2026 sales growth in the mid- to high teens covers a year that is already three-quarters reported. The forecast therefore mostly reflects results already reported rather than a pace for later years.
How Caterpillar’s Upside Changes Under Other Assumptions
The table below changes one assumption at a time and keeps the other two as in the scenario.
| If instead | Upside |
|---|---|
| Nothing changes (the scenario) | 60.8% |
| Revenue growth of 15.2% a year instead of 17.2% | 52.7% |
| Net margin of 15.1% in year three instead of 15.2% | 60.0% |
| 5 years at the same assumptions instead of 3 | 120.9% |
Extending the same pace to five years would about double the upside. The scenario’s pace comes from one strong year: revenue grew 20.3% over the twelve months to September 2026, after slipping about 1.5% in each of the two previous twelve-month periods. For the fourth quarter of fiscal 2026, management expects only moderate sales growth, as Caterpillar laps a strong quarter a year earlier.
Taking one assumption at a time, revenue could grow as little as 0.06% a year before three years of owning the stock leave the share price unchanged. The net margin could fall to 9.4%, against a low of 13.1% at the previous twelve quarter-ends. The P/E could drop to 14.5, against 14.4 at the end of 2023, the lowest of its readings at the last twelve quarter-ends.
Because all of the scenario’s gain comes from revenue, Caterpillar’s year-over-year revenue growth is the figure to watch in its fourth-quarter report.
Not Sure Caterpillar Is Worth It At This Price?
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