QS Research · Michael Burry's Scion Capital analyst template · 2006
CATERPILLAR INC (CAT)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction high · base case -33% · downside -56% · upside -20%
The market is capitalizing $16.68B of TTM EBITDA (N14) at 17.0x EV/EBITDA (N27) as if it were permanent, but the six FY2020-FY2025 average EBITDA is only $11.68B (S2); on that normalized base the stock is worth $372 at today's 17.0x, -33% from $558.63 (N24, N5, N1). I use the six-year average rather than section 13's FY2023-FY2025 average because FY2023-FY2025 are the three strongest years in the record. Even at 20x on normalized EBITDA the value is $449, -20%, so today's price needs the peak TTM $16.68B to persist (N14, N25, S2). The record $78.1B backlog (S15) and AI/data-center power demand (S14) are real but already more than priced; the risk/reward is short.
Key numbers
- Share price: $558.63
- Market cap: $255.63B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $77.77B
- EV / EBITDA (TTM): 17.0x
- P/E (TTM): 21.6x
The 15 boxes
- ✓ 1. Long-form business notes
Caterpillar is a dealer-distributed machinery, power and finance business: FY2025 sales and revenues were $67.589 billion, up from $41.748 billion in FY2020, with four reportable segments and Cat Financial attached to pull machine sales through 41 U.S. and 109 non-U.S. dealers serving 190 countries. The six-year XBRL record shows a wide earnings cycle: operating income of $4.55B (FY2020), $12.97B (FY2023), $13.07B (FY2024) and $11.15B (FY2025) on revenue of $67.59B — FY2025 revenue set a high while operating income fell versus FY2024. Between the FY2020 and FY2025 reports the portfolio was renamed and re-cut (Energy & Transportation becomes Power & Energy), a new strategy and mission statement were introduced in 2025, and firm backlog nearly doubled to $51.2 billion at December 31, 2025.
- ✓ 2. Competitive advantage
Caterpillar competes in highly competitive worldwide markets on product performance, customer service, quality and price, and the 10-K itself says price discounting happens and hits margins, so the moat is not pricing power. What the filings do evidence is distribution scale (41 U.S. plus 109 non-U.S. dealers serving 190 countries, with dealer agreements tied to defined territories and the Cat trademarks) and demand visibility ($51.2B firm backlog at December 31, 2025 versus $30.0B a year earlier). The six-year record shows a cyclical but consistently cash-generative business: operating income ran from $4.55B in FY2020 to $13.07B in FY2024 and $11.15B in FY2025, and operating cash flow exceeded net income to common in every one of those years. Competition is described as unchanged in substance in the 2026 filing.
- ✓ 3. 10-Q takeaways
Q3 2026 was a volume-led acceleration: total sales and revenues of $20.682 billion, up 17 percent, with operating margin of 20.4 percent versus 17.3 percent a year earlier, though Q3 2026 operating profit included $128 million of IEEPA tariff recoveries booked in cost of goods sold. Cash generation was strong ($4.4 billion enterprise operating cash flow in the quarter, $7.9 billion enterprise cash at quarter end) and $1.2 billion went to buybacks plus $0.7 billion to dividends. Dealer inventory kept building (+$800 million in Q3 2026, +$3.5 billion over nine months), and management guides Q4 2026 to only "moderate" sales growth with a roughly $1.6 billion seasonal dealer inventory draw, alongside full-year 2026 sales growth in the mid-to-high teens.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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