Caterpillar Inc. (CAT) Discounted Future Market Cap

Caterpillar Inc.

CAT (NYSE)

(%)

Valuation
Caterpillar Inc. Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("ratio:priceEarningsRatio"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

data.set_default_range(f"{-assumptions.get('historical_years')}->0")

assumptions.set("%net_income_margin", data.average(f"%netMargin"))
assumptions.set_bounds(
    "%net_income_margin", low=0, high="100%"
)

assumptions.set("%revenue_growth_rate", data.average(f"%revenueGrowthRate"))
assumptions.set_bounds(
    "%revenue_growth_rate", low=0, high="25%"
)

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"""
        income:revenue:-1 * 
        (1 + {assumptions.get('%revenue_growth_rate')})
    """,
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("income:revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("profile:price"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	296 USD
Estimated net income	7.19 Bil. USD
Estimated market capitalization	235.4 Bil. USD
Market capitalization discounted to present	138.7 Bil. USD
Shares Outstanding	468.6 Mil.
Earnings Per Share (EPS)	19.51 USD
Market Price	647.2 USD
Price to Earnings (PE) Ratio	32.74

Historical and forecasted data

Monetary values in USD

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "timeseries": "annual", "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [{"l": "2015", "x": "2015-12-31", "y": 47011000000}, {"l": "2016", "x": "2016-12-31", "y": 38537000000}, {"l": "2017", "x": "2017-12-31", "y": 45462000000}, {"l": "2018", "x": "2018-12-31", "y": 54722000000}, {"l": "2019", "x": "2019-12-31", "y": 53800000000}, {"l": "2020", "x": "2020-12-31", "y": 41748000000}, {"l": "2021", "x": "2021-12-31", "y": 50971000000}, {"l": "2022", "x": "2022-12-31", "y": 59427000000}, {"l": "2023", "x": "2023-12-31", "y": 67060000000}, {"l": "2024", "x": "2024-12-31", "y": 64809000000}, {"l": "2025", "x": "2025-12-31", "y": 66539400300, "oy": 66539400300, "e": true, "d": 2025, "g": 2.67, "og": 2.67}, {"l": "2026", "x": "2026-12-31", "y": 68316002288, "oy": 68316002288, "e": true, "d": 2026, "g": 2.67, "og": 2.67}, {"l": "2027", "x": "2027-12-31", "y": 70140039549, "oy": 70140039549, "e": true, "d": 2027, "g": 2.67, "og": 2.67}, {"l": "2028", "x": "2028-12-31", "y": 72012778605, "oy": 72012778605, "e": true, "d": 2028, "g": 2.67, "og": 2.67}, {"l": "2029", "x": "2029-12-31", "y": 73935519793, "oy": 73935519793, "e": true, "d": 2029, "g": 2.67, "og": 2.67}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [{"l": "2015", "x": "2015-12-31", "y": 2512000000}, {"l": "2016", "x": "2016-12-31", "y": -67000000}, {"l": "2017", "x": "2017-12-31", "y": 754000000}, {"l": "2018", "x": "2018-12-31", "y": 6147000000}, {"l": "2019", "x": "2019-12-31", "y": 6093000000}, {"l": "2020", "x": "2020-12-31", "y": 2998000000}, {"l": "2021", "x": "2021-12-31", "y": 6489000000}, {"l": "2022", "x": "2022-12-31", "y": 6705000000}, {"l": "2023", "x": "2023-12-31", "y": 10335000000}, {"l": "2024", "x": "2024-12-31", "y": 10792000000}, {"l": "2025", "x": "2025-12-31", "y": 6470291285, "oy": 6470291285, "e": true, "d": 2025, "g": -40.05, "og": -40.05}, {"l": "2026", "x": "2026-12-31", "y": 6643048062, "oy": 6643048062, "e": true, "d": 2026, "g": 2.67, "og": 2.67}, {"l": "2027", "x": "2027-12-31", "y": 6820417445, "oy": 6820417445, "e": true, "d": 2027, "g": 2.67, "og": 2.67}, {"l": "2028", "x": "2028-12-31", "y": 7002522591, "oy": 7002522591, "e": true, "d": 2028, "g": 2.67, "og": 2.67}, {"l": "2029", "x": "2029-12-31", "y": 7189489944, "oy": 7189489944, "e": true, "d": 2029, "g": 2.67, "og": 2.67}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}], "editableDates": {"2025-12-31": 41, "2026-12-31": 42, "2027-12-31": 43, "2028-12-31": 44, "2029-12-31": 45}, "properties": {"display_table": true}, "width": "full"}

Edit Chart Values	2025-12-31	2026-12-31	2027-12-31	2028-12-31	2029-12-31

↳ Growth Rate

Estimated Future Values

Monetary values in USD amounts except #	2024 Dec 31	LTM Jan 16	2025 Dec 31	2026 Dec 31	2027 Dec 31	2028 Dec 31	2029 Dec 31
Revenue	64,809	64,671	66,539	68,316	70,140	72,013	73,936
Revenue Growth Rate	-3.36%	-0.213%	2.67%	2.67%	2.67%	2.67%	2.67%
Net Income	10,792	9,263	6,470	6,643	6,820	7,003	7,189

Monetary values in USD

amounts except #

2024
Dec 31

LTM
Jan 16

2025
Dec 31

2026
Dec 31

2027
Dec 31

2028
Dec 31

2029
Dec 31

Revenue

64,809

64,671

66,539

68,316

70,140

72,013

73,936

Revenue Growth Rate

-3.36%

-0.213%

2.67%

Net Income

10,792

9,263

6,470

6,643

6,820

7,003

7,189

Historical Values

Monetary values in USD amounts except #	Average	LTM Jan 16	2024 Dec 31	2023 Dec 31	2022 Dec 31	2021 Dec 31	2020 Dec 31	2019 Dec 31	2018 Dec 31	2017 Dec 31	2016 Dec 31	2015 Dec 31
Revenue	53,474	64,671	64,809	67,060	59,427	50,971	41,748	53,800	54,722	45,462	38,537	47,011
Cost of Revenue	36,850	42,731	41,485	43,797	41,915	35,968	29,671	37,384	37,719	31,906	28,640	34,133
Gross Profit	16,624	21,940	23,324	23,263	17,512	15,003	12,077	16,416	17,003	13,556	9,897	12,878
Gross Margin	30.63%	33.93%	35.99%	34.69%	29.47%	29.43%	28.93%	30.51%	31.07%	29.82%	25.68%	27.39%
Operating Income	7,531	11,474	13,072	12,966	7,904	6,878	4,553	8,290	8,293	4,460	1,162	3,785
Operating Margin	13.31%	17.74%	20.17%	19.33%	13.3%	13.49%	10.91%	15.41%	15.15%	9.81%	3.02%	8.05%
Net Income	5,638	9,263	10,792	10,335	6,705	6,489	2,998	6,093	6,147	754	-67	2,512
Net Margin	9.72%	14.32%	16.65%	15.41%	11.28%	12.73%	7.18%	11.33%	11.23%	1.66%	-0.174%	5.34%

Historical Growth Rates

Monetary values in USD amounts except #	Average	LTM Jan 16	2024 Dec 31	2023 Dec 31	2022 Dec 31	2021 Dec 31	2020 Dec 31	2019 Dec 31	2018 Dec 31	2017 Dec 31	2016 Dec 31	2015 Dec 31
Revenue	53,474	64,671	64,809	67,060	59,427	50,971	41,748	53,800	54,722	45,462	38,537	47,011
Revenue Growth Rate	2.67%	-0.213%	-3.36%	12.84%	16.59%	22.09%	-22.4%	-1.69%	20.37%	17.97%	-18.03%	-14.81%
Net Income	5,638	9,263	10,792	10,335	6,705	6,489	2,998	6,093	6,147	754	-67	2,512
Net Margin	9.72%	14.32%	16.65%	15.41%	11.28%	12.73%	7.18%	11.33%	11.23%	1.66%	-0.174%	5.34%
Net Income Growth Rate	-45.23%	-14.17%	4.42%	54.14%	3.33%	116.4%	-50.8%	-0.878%	715.3%	-1,225%	-102.7%	2.45%
Stockholders Equity	16,145	20,658	19,491	19,494	15,869	16,484	15,331	14,588	14,039	13,697	13,137	14,809
Equity Growth Rate	2.32%	5.99%	-0.015%	22.84%	-3.73%	7.52%	5.09%	3.91%	2.5%	4.26%	-11.29%	-11.57%
Return on Invested Capital (ROIC)	12.02%	17.98%	21.63%	22.32%	13.92%	12.41%	7.89%	14.8%	15.33%	1.65%	-1.06%	5.33%
After-tax Operating Income	5,514	9,023	10,511	10,216	6,041	5,423	3,410	6,444	6,498	826	-515.5	2,777
Income Tax Rate	38.95%	21.37%	19.59%	21.21%	23.57%	21.15%	25.09%	22.27%	21.64%	81.48%	144.4%	26.64%
Invested Capital	46,506	50,193	48,603	45,770	43,408	43,692	43,255	43,540	42,401	50,031	48,572	52,100