Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Caterpillar Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 9.3% to 7.3% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 112, DPO 73, DIO 143). At a 8.3% WACC with mid-year discounting, the terminal value (89% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 22.6x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $728.95 per share, suggesting CAT is fairly valued by 3.6% at the current price of $703.90.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 13,448 | 14,665 | 15,960 | 16,339 | 17,533 | 17,971 |
| (−) Net Interest | 705 | 769 | 837 | 856 | 919 | 942 |
| (+) D&A | 2,569 | 2,693 | 2,849 | 2,965 | 3,074 | 3,151 |
| EBITDA | 16,721 | 18,127 | 19,645 | 20,160 | 21,526 | 22,064 |
| (−) Tax | 2,944 | 3,211 | 3,494 | 3,577 | 3,838 | — |
| (−) CapEx | 3,096 | 3,376 | 3,674 | 3,761 | 4,036 | — |
| (−) ΔWC | 1,496 | 2,919 | 3,103 | 908 | 2,863 | — |
| Free Cash Flow (FCF) | 9,185 | 8,622 | 9,374 | 11,914 | 10,789 | — |
| Peers' EBITDA Multiple | 22.6x | |||||
| Terminal Value | 499,758 | |||||
| WACC / Discount Rate | 8.35% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 8,824 | 7,644 | 7,670 | 8,997 | 7,520 | 334,614 |
| Enterprise Value | 375,269 | |||||
| Projection Period | 40,656 | 10.8% | ||||
| Terminal Value | 334,614 | 89.2% | ||||
| (−) Current Net Debt | 33,350 | |||||
| Equity Value | 341,919 | |||||
| (÷) Outstanding Shares | 469M | |||||
| Fair Price | $729 | +3.6% | ||||
| WACC \ EV/EBITDA Exit Multiple | 18.6x | 20.6x | 22.6x | 24.6x | 26.6x |
|---|---|---|---|---|---|
| 6.4% | $664 | $734 | $803 | $872 | $941 |
| 7.4% | $633 | $699 | $765 | $831 | $897 |
| 8.4% | $603 | $666 | $729 | $792 | $855 |
| 9.4% | $575 | $635 | $695 | $755 | $815 |
| 10.4% | $548 | $605 | $663 | $720 | $778 |
Current price: $703.90. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.