Caterpillar Beneish M Score

CAT
 Stock
  

USD 185.39  1.75  0.95%   

This module uses fundamental data of Caterpillar to approximate the value of its Beneish M Score. Caterpillar M Score tells investors if the company management is likely to be manipulating earnings. The score is calculated using eight financial indicators that are adjusted by a specific multiplier. Please note, the M Score is a probabilistic model and cannot detect companies that manipulate their earnings with 100% accuracy. Continue to Caterpillar Piotroski F Score and Caterpillar Altman Z Score analysis.
  
Caterpillar Debt Current is comparatively stable at the moment as compared to the past year. Caterpillar reported Debt Current of 11.76 Billion in 2021. Issuance Repayment of Debt Securities is likely to gain to about 765.2 M in 2022, whereas Debt to Equity Ratio is likely to drop 3.91 in 2022. Caterpillar Return on Investment is comparatively stable at the moment as compared to the past year. Caterpillar reported Return on Investment of 13.74 in 2021. Revenue to Assets is likely to gain to 0.69 in 2022, whereas Cash Flow Per Share is likely to drop 11.82 in 2022.
At this time, it appears that Caterpillar is an unlikely manipulator. The earnings manipulation may begin if Caterpillar's top management creates an artificial sense of financial success, forcing the stock price to be traded at a high price-earnings multiple than it should be. In general, excessive earnings management by Caterpillar executives may lead to removing some of the operating profits from subsequent periods to inflate earnings in the following periods. This way, the manipulation of Caterpillar's earnings can lead to misrepresentations of actual financial condition, taking the otherwise loyal stakeholders on to the path of questionable ethical practices and plain fraud.
-2.55
Beneish M Score - Unlikely Manipulator
Elasticity of Receivables1.0Focus
Asset Quality0.78Focus
Expense Coverage0.99Focus
Gross Margin Strengs1.09Focus
Accruals Factor0.99Focus
Depreciation Resistance1.01Focus
Net Sales Growth0.95Focus
Financial Leverage Condition1.0Focus

Caterpillar Beneish M-Score Indicator Trends

The cure to earnings manipulation is the transparency of financial reporting. It will typically remove the temptation of the top executives to inflate earnings (i.e., to promote the idea of 'winning at any cost'). Because a healthy internal audit department can enhance transparency, the board should promote the auditors' access to all the record-keeping systems across the enterprise. For example, if Caterpillar's auditors report directly to the board (not management), the managers will be reluctant to manipulate simply due to the fear of punishment. On the other hand, the auditors will be free to investigate the ledgers properly because they know that the board has their back.
Current ValueLast YearChange From Last Year 10 Year Trend
Revenues48.6 B51 B
Sufficiently Down
Decreasing
Slightly volatile
Selling General and Administrative Expense5.1 B5.4 B
Notably Down
Decreasing
Slightly volatile
Net Cash Flow from Operations6.7 B7.2 B
Significantly Down
Decreasing
Stable
Depreciation Amortization and Accretion2.4 B2.4 B
Fairly Up
Decreasing
Slightly volatile
Total Assets77.6 B82.8 B
Notably Down
Decreasing
Slightly volatile
Investments290.7 M295.6 M
Fairly Down
Increasing
Slightly volatile
Investments Non Current290.7 M295.6 M
Fairly Down
Increasing
Slightly volatile
Property Plant and Equipment Net12.5 B12.1 B
Sufficiently Up
Decreasing
Slightly volatile
Trade and Non Trade Receivables29.7 B31.3 B
Notably Down
Decreasing
Slightly volatile
Total Liabilities62.3 B66.3 B
Notably Down
Decreasing
Slightly volatile
Current Assets45 B43.5 B
Sufficiently Up
Increasing
Slightly volatile
Assets Non Current38.6 B39.3 B
Fairly Down
Decreasing
Slightly volatile
Current Liabilities27.3 B29.8 B
Significantly Down
Decreasing
Stable
Liabilities Non Current35 B36.4 B
Sufficiently Down
Decreasing
Slightly volatile
Total Debt35.6 B37.8 B
Notably Down
Increasing
Very volatile
Debt Current12.9 B11.8 B
Significantly Up
Increasing
Slightly volatile
Debt Non Current24.5 B26 B
Notably Down
Decreasing
Stable
Operating Income6.9 B6.9 B
Slightly Up
Decreasing
Very volatile
Gross Margin0.320.294
Significantly Up
Increasing
Slightly volatile

Caterpillar Beneish M-Score Driver Matrix

One of the toughest challenges investors face today is learning how to quickly synthesize historical financial statements and information provided by the company, SEC reporting, and various external parties in order to detect the potential manipulation of earnings. Understanding the correlation between Caterpillar's different financial indicators related to revenue, expenses, operating profit, and net earnings helps investors identify and prioritize their investing strategies towards Caterpillar in a much-optimized way. Analyzing correlations between earnings drivers directly associated with dollar figures is the most effective way to find Caterpillar's degree of accounting gimmicks and manipulations.

About Caterpillar Beneish M Score

M-Score is one of many grading techniques for value stocks. It was developed by Professor M. Daniel Beneish of the Kelley School of Business at Indiana University and published in 1999 under the paper titled The Detection of Earnings Manipulation. The Beneish score is a multi-factor model that utilizes financial identifiers to compile eight variables used to classify whether a company has manipulated its reported earnings. The variables are built from the officially filed financial statements to create a final score call 'M Score.' The score helps to identify companies that are likely to manipulate their profits if they show deteriorating gross margins, operating expenses, and leverage against growing revenue.

Operating Expenses

7.97 Billion

Caterpillar Operating Expenses is comparatively stable at the moment as compared to the past year. Caterpillar reported Operating Expenses of 8.12 Billion in 2021

Caterpillar Earnings Manipulation Drivers

Although earnings manipulation is typically not the result of intentional misconduct by the c-level executives, it is still a widespread practice by the senior management of public companies such as Caterpillar. It is usually done by a series of misrepresentations of various accounting rules and operating activities across multiple financial cycles. The best way to spot the manipulation is to examine the historical financial statement to find inconsistencies in earning reports to find trends in assets or liabilities that are not sustainable in the future.
201720182019202020212022 (projected)
Revenues45.46 B54.72 B53.8 B41.75 B50.97 B48.61 B
Total Assets76.96 B78.51 B78.45 B78.32 B82.79 B77.56 B
Current Assets36.24 B38.6 B39.19 B39.46 B43.45 B44.96 B
Assets Non Current40.72 B39.91 B39.26 B38.86 B39.34 B38.62 B
Total Liabilities63.2 B64.43 B63.82 B62.95 B66.28 B62.32 B
Current Liabilities26.93 B28.22 B26.62 B25.72 B29.85 B27.29 B
Total Debt34.88 B36.55 B37.66 B37.16 B37.79 B35.61 B
Debt Non Current23.85 B25 B26.28 B26 B26.03 B24.51 B
Operating Income4.46 B8.29 B8.29 B4.55 B6.88 B6.89 B

Caterpillar ESG Sustainability

Some studies have found that companies with high sustainability scores are getting higher valuations than competitors with lower social-engagement activities. While most ESG disclosures are voluntary and do not directly affect the long term financial condition, Caterpillar's sustainability indicators can be used to identify proper investment strategies using environmental, social, and governance scores that are crucial to Caterpillar's managers, analysts, and investors.
Environment Score
Governance Score
Social Score

About Caterpillar Fundamental Analysis

The Macroaxis Fundamental Analysis modules help investors analyze Caterpillar's financials across various querterly and yearly statements, indicators and fundamental ratios. We help investors to determine the real value of Caterpillar using virtually all public information available. We use both quantitative as well as qualitative analysis to arrive at the intrinsic value of Caterpillar based on its fundamental data. In general, a quantitative approach, as applied to this company, focuses on analyzing financial statements comparatively, whereas a qaualitative method uses data that is important to a company's growth but cannot be measured and presented in a numerical way.
Please read more on our fundamental analysis page.
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide. The company was founded in 1925 and is headquartered in Deerfield, Illinois. Caterpillar operates under Farm Heavy Construction Machinery classification in the United States and is traded on New York Stock Exchange. It employs 107700 people.

Be your own money manager

Our tools can tell you how much better you can do entering a position in Caterpillar without increasing your portfolio risk or giving up expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate.risk-adjusted returns of your individual positions relative to your overall portfolio.

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Pair Trading with Caterpillar

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Caterpillar position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Caterpillar will appreciate offsetting losses from the drop in the long position's value.

Moving together with Caterpillar

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Moving against Caterpillar

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The ability to find closely correlated positions to Caterpillar could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Caterpillar when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Caterpillar - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Caterpillar to buy it.
The correlation of Caterpillar is a statistical measure of how it moves in relation to other equities. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Caterpillar moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Caterpillar moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Caterpillar can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
Continue to Caterpillar Piotroski F Score and Caterpillar Altman Z Score analysis. Note that the Caterpillar information on this page should be used as a complementary analysis to other Caterpillar's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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Is Caterpillar's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Caterpillar. If investors know Caterpillar will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Caterpillar listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth YOY
0.032
Market Capitalization
97.9 B
Quarterly Revenue Growth YOY
0.14
Return On Assets
0.063
Return On Equity
0.39
The market value of Caterpillar is measured differently than its book value, which is the value of Caterpillar that is recorded on the company's balance sheet. Investors also form their own opinion of Caterpillar's value that differs from its market value or its book value, called intrinsic value, which is Caterpillar's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Caterpillar's market value can be influenced by many factors that don't directly affect Caterpillar's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Caterpillar's value and its price as these two are different measures arrived at by different means. Investors typically determine Caterpillar value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Caterpillar's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.