General Motors Company (GM), Caterpillar Inc. (CAT): The Car Giants Are Fully Valued, But Vehicle Values Exist

But Caterpillar Inc. (NYSE:CAT) remains your best bet for profits right now. Its fall in value was fueled by narrower profits, which are now in the range of both Ford and GM. Its balance sheet is stronger, with plenty of cash to fuel debt, and a debt-to-assets ratio below 0.5. The company has strong operating cash flow, and room to grow.

Caterpillar Inc. (NYSE:CAT) doesn’t make cars and trucks. It makes farm and industrial equipment. These are markets that are due to grow as the economy expands, perhaps much faster than consumer markets. The company makes machines that are well-suited to use in both the oil industry and in oil infrastructure, which is booming.  The company is especially strong in China, where recent weakness has turned up in the parent company’s results, but that economy continues to grow, and thus so should Caterpillar Inc. (NYSE:CAT) sales.

Thanks to its recent fall from grace, Caterpillar Inc. (NYSE:CAT) is now selling at a PE of just 9.76. This is lower than that of General Motors Company (NYSE:GM), and only slightly higher than that of Ford, despite its solid growth prospects. The company hasn’t always been such a bargain, and unlike the car companies has traded at double-digit multiples in the last several years.

It can again. At current prices Caterpillar Inc. (NYSE:CAT) offers a 2.5% dividend that is likely to expand, and solid growth prospects in both the U.S. and internationally. Right now it’s the true bargain on the vehicle board.

The article The Car Giants Are Fully Valued, But Vehicle Values Exist originally appeared on Fool.com and is written by Dana Blankenhorn.

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