Stock Analysis on Net

Caterpillar Inc. (NYSE:CAT)

$19.99

Economic Value Added (EVA)

Microsoft Excel

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Economic Profit

Caterpillar Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Caterpillar Inc. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 not reaching 2019 level.

Net Operating Profit after Taxes (NOPAT)

Caterpillar Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Profit attributable to common stockholders
Deferred income tax expense (benefit)1
Increase (decrease) in LIFO reserve2
Increase (decrease) in product warranty liability3
Increase (decrease) in employee separation liability4
Increase (decrease) in equity equivalents5
Interest expense excluding Financial Products
Interest expense, operating lease liability6
Adjusted interest expense excluding Financial Products
Tax benefit of interest expense excluding Financial Products7
Adjusted interest expense excluding Financial Products, after taxes8
Investment and interest income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in LIFO reserve. See details »

3 Addition of increase (decrease) in product warranty liability.

4 Addition of increase (decrease) in employee separation liability.

5 Addition of increase (decrease) in equity equivalents to profit attributable to common stockholders.

6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

7 2021 Calculation
Tax benefit of interest expense excluding Financial Products = Adjusted interest expense excluding Financial Products × Statutory income tax rate
= × 21.00% =

8 Addition of after taxes interest expense to profit attributable to common stockholders.

9 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

10 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Caterpillar Inc. NOPAT decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Cash Operating Taxes

Caterpillar Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense excluding Financial Products
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Caterpillar Inc. cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Invested Capital

Caterpillar Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Short-term borrowings
Long-term debt due within one year
Long-term debt due after one year
Operating lease liability1
Total reported debt & leases
Equity attributable to common shareholders
Net deferred tax (assets) liabilities2
LIFO reserve3
Product warranty liability4
Employee separation liability5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Noncontrolling interests
Adjusted equity attributable to common shareholders
Construction-in-process8
Investments in debt and equity securities9
Invested capital

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of LIFO reserve. See details »

4 Addition of product warranty liability.

5 Addition of employee separation liability.

6 Addition of equity equivalents to equity attributable to common shareholders.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction-in-process.

9 Subtraction of investments in debt and equity securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Caterpillar Inc. invested capital decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Cost of Capital

Caterpillar Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Short-term borrowings and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term borrowings and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Short-term borrowings and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term borrowings and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Short-term borrowings and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term borrowings and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Short-term borrowings and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2018-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term borrowings and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Short-term borrowings and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2017-12-31).

1 US$ in millions

2 Equity. See details »

3 Short-term borrowings and long-term debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Caterpillar Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
3M Co.
Boeing Co.
General Electric Co.
Honeywell International Inc.
Lockheed Martin Corp.
Raytheon Technologies Corp.

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Caterpillar Inc. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 not reaching 2019 level.

Economic Profit Margin

Caterpillar Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit1
Sales of Machinery, Energy & Transportation
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
3M Co.
Boeing Co.
General Electric Co.
Honeywell International Inc.
Lockheed Martin Corp.
Raytheon Technologies Corp.

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 Economic profit. See details »

2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales of Machinery, Energy & Transportation
= 100 × ÷ =

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Caterpillar Inc. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.