Caterpillar Inc.

Methodology

Caterpillar's heavy exposure to construction and mining cycles makes this calculation highly sensitive to where we are in the economic cycle. During infrastructure booms and commodity peaks, earnings and fair values surge; during recessions, they collapse sharply. Using normalized mid-cycle earnings rather than current results produces more reliable valuation baselines for this cyclical manufacturer.

Methodology

Caterpillar's PEG ratio fluctuates dramatically across economic cycles, often appearing cheap at cycle peaks (when growth is high) and expensive at troughs (when growth is negative or low). The company rarely sustains high growth rates beyond cyclical upswings, making PEG most useful for relative comparisons rather than absolute valuation. A PEG below 1.5 during early-cycle phases can signal attractive entry points before infrastructure spending accelerates.

Methodology

Caterpillar's dividend yield (typically 2-3%) provides some downside cushion during cyclical downturns, making PEGY more attractive than PEG for this industrial. The company's commitment to maintaining dividends through cycles adds a total return element beyond pure earnings growth. For cyclical industrials like Caterpillar, PEGY helps balance growth timing challenges by incorporating the steady income component.