Is Caterpillar, Inc. overvalued or undervalued?

As of 8 May 2025, the valuation grade for Caterpillar, Inc. has moved from very expensive to expensive, indicating a slight improvement in its valuation outlook. Despite this change, the company is still considered overvalued. Key ratios include a P/E ratio of 26, an EV to EBITDA of 20.17, and a Price to Book Value of 14.47, which are significantly higher than its peers. For instance, PACCAR, Inc. has a P/E of 13.79 and an EV to EBITDA of 9.98, highlighting the premium at which Caterpillar is trading compared to its competition.
In terms of performance, Caterpillar has shown strong returns over the past year, with a 1Y stock return of 11.71%, slightly outperforming the S&P 500's 10.26%. However, given the elevated valuation metrics and the comparison with peers, it reinforces the assessment that Caterpillar, Inc. is overvalued in the current market environment.