Caterpillar vs Cummins Which Offers More Value?

Caterpillar Inc. and Cummins Inc. are two prominent companies in the manufacturing and technology industries. Both companies are known for producing high-quality products and services, with a strong presence in the global market. Their stocks have been closely watched by investors due to their performance in various economic conditions. This article will explore the key differences between Caterpillar and Cummins stocks, analyzing their financial standings, market trends, and potential for growth in the future.

Caterpillar or Cummins?

When comparing Caterpillar and Cummins, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Caterpillar and Cummins.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Caterpillar has a dividend yield of 1.42%, while Cummins has a dividend yield of 1.9%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Caterpillar reports a 5-year dividend growth of 8.80% year and a payout ratio of 24.61%. On the other hand, Cummins reports a 5-year dividend growth of 7.92% year and a payout ratio of 45.64%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Caterpillar P/E ratio at 17.26 and Cummins's P/E ratio at 24.05. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Caterpillar P/B ratio is 9.50 while Cummins's P/B ratio is 4.89.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Caterpillar has seen a 5-year revenue growth of 0.42%, while Cummins's is 0.64%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Caterpillar's ROE at 57.98% and Cummins's ROE at 22.20%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $378.89 for Caterpillar and $365.83 for Cummins. Over the past year, Caterpillar's prices ranged from $276.94 to $418.50, with a yearly change of 51.12%. Cummins's prices fluctuated between $226.53 and $387.90, with a yearly change of 71.24%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.