Here’s Why Caterpillar (CAT) is a Strong Value Stock

Your age or experience does not matter: fully exploiting the stock market and investing confidently are common goals for all investors. Fortunately, Zacks Premium offers several ways to do both.

With daily updates to the Zacks Rank and Zacks Industry Rank, full access to the Zacks # 1 Rank List, equity research reports, and premium stock screens, the research service can help you become a smarter, more confident investor.

Zacks Premium also includes access to the Zacks Style Scores.

What are the Zacks Style Scores?

The Zacks Style Scores are a unique set of guidelines that rate stocks based on three popular investment types and are designed as complementary indicators of Zacks Rank. This combination helps investors choose stocks with the highest chance of beating the market in the next 30 days.

Each stock is given an alphabetical rating of A, B, C, D, or F based on its value, growth, and momentum qualities. In this system, an A is better than a B, a B is better than a C, and so on. That is, the better the score, the greater the chance the stock will outperform.

The style scores are divided into four categories:


Value investors love to find good stocks at good prices, especially before the broader market realizes a stock’s true value. Using key figures such as P / E ratio, PEG, price / sales, price / cash flow and many other multipliers, the Value Style Score identifies the most attractive and most heavily discounted stocks.

Growth factor

Growth investors are more concerned about a stock’s future prospects and a company’s overall financial health and strength. Therefore, the Growth Style Score analyzes traits such as forecast and historical earnings, sales, and cash flow to find stocks that will experience sustainable growth over time.

Momentum score

Momentum trading is about capitalizing on an upward or downward trend in the price or earnings outlook of a stock, and these investors live by the adage, “trend is your friend.” The Momentum Style Score can show good times to build a position in a stock based on factors such as a week-long price change and the monthly percentage change in earnings estimates.

The story goes on

VGM score

What if you want to use all three types of investments? The VGM score is a combination of all of the style scores, making it one of the most comprehensive indicators of Zacks rank. It rates each stock based on their combined weighted styles, which helps narrow down the companies with the most attractive value, the best growth forecast, and the most promising momentum.

How Style Scores Work with Zacks Rank

The Zacks Rank, a proprietary stock valuation model, uses revisions to earnings estimates or changes to a company’s earnings expectations to help build a successful portfolio.

Stock # 1 (Strong Buy) has posted an unmatched average annual return of + 25.41% since 1988, more than double the performance of the S&P 500 over the same period. However, the Zacks rank studies a lot of stocks, and there may be more than 200 companies with a strong Buy rank and another 600 with a # 2 (Buy) rank on any given day.

This includes more than 800 top-rated stocks, and picking the best stocks for you and your portfolio can be overwhelming.

This is where the style scores come into play.

For the best chance of high returns, you should always consider stocks with a Zacks # 1 or # 2 rank, which also have a style score of A or B, which gives you the highest chance of success. When looking at rank 3 (hold) stocks, it is important that they also have scores of A or B to ensure as much upside potential as possible.

As mentioned above, the scores are designed to work with Zacks rank, so any change in a company’s earnings outlook should be a determining factor in choosing which stocks to buy.

A stock rated # 4 (Sell) or # 5 (Strong Sell), even one rated A and B, still has a declining profit forecast and a greater chance of the stock price falling too.

The more stocks you own with rank 1 or 2 and a rating of A or B, the better.

Watchable Stock: Caterpillar (CAT)

Known for its iconic yellow machines, Caterpillar is the world’s largest manufacturer of construction and mining equipment. Serving a wide variety of sectors – infrastructure, construction, mining, oil & gas, and transportation – the company is considered a pioneer in the global economy.

CAT is a No. 3 (Hold) on the Zacks rank with a VGM score of B.

Thanks to attractive valuation metrics such as a forward P / E ratio of 21.17, it also has a value style score of B; Value investors should watch out for this.

10 analysts have revised their earnings estimates upward over the past 60 days for fiscal 2021, while the Zacks Consensus Estimate has increased by $ 0.41 to $ 10.08 per share. CAT also has an average earnings surprise of 29.9%.

With a solid Zacks rank and top notch value and VGM style scores, CAT should be on the shortlist of investors.

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Caterpillar Inc. (CAT): Free Stock Research Report

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