ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Caterpillar's annualized return on invested capital (ROIC %) for the quarter that ended in Mar. 2026 was 13.32%.
As of today (2026-06-25), Caterpillar's WACC % is 13.92%. Caterpillar's ROIC % is 12.66% (calculated using TTM income statement data).
Caterpillar earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Caterpillar (XSWX:CAT) ROIC % Explanation
ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.
There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.
Why is ROIC % important?
Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.
As of today, Caterpillar's WACC % is 13.92%. Caterpillar's ROIC % is 12.66% (calculated using TTM income statement data).
Caterpillar earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Be Aware
Like ROE % and ROA %, ROIC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.
Caterpillar ROIC % Related Terms
Caterpillar ROIC % Historical Data
* Premium members only.
The historical data trend for Caterpillar's ROIC % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
For the Farm & Heavy Construction Machinery subindustry, Caterpillar's ROIC %, along with its competitors' market caps and ROIC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Caterpillar ROIC % vs Farm & Heavy Construction Machinery Industry
For the Farm & Heavy Construction Machinery industry and Industrials sector, Caterpillar's ROIC % distribution charts can be found below:
* The bar in red indicates where Caterpillar's ROIC % falls into.
Note:
The Operating Income data used here is four times the quarterly (Mar. 2026) data.
The tax rate is limited to between 0% and 100%.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Caterpillar (XSWX:CAT) has a ROIC % of 13.32% as of Mar. 2026. Return on invested capital is the ratio of current-period net income to average two-period invested capital. View historical data on Caterpillar and its competitors.
Is Caterpillar's ROIC % too high?
Caterpillar's current ROIC % is 13.32%. The Farm & Heavy Construction Machinery industry median ROIC % is 5.47. Caterpillar's value of 13.32% is 143.5% above this industry median. Overall, Caterpillar has a GF Score™ of 83/100, reflecting its overall financial health beyond just this single metric.
How does Caterpillar's ROIC % compare to DE and PCAR?
Caterpillar's ROIC % of 13.32% can be compared against companies in the Farm & Heavy Construction Machinery industry. The industry median ROIC % is 5.47. Caterpillar's value of 13.32% is 143.5% above this benchmark. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good ROIC % for a Farm & Heavy Construction Machinery company?
The median ROIC % among Farm & Heavy Construction Machinery companies is 5.47, based on 207 companies in the industry. Companies in the top quartile (top 25%) have a ROIC % significantly above this median, while those in the bottom quartile fall well below. However, ROIC % should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Caterpillar's current ROIC % of 13.32% is 143.5% above the industry median. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high ROIC % mean?
A high ROIC % can signal that a stock is expensive relative to its fundamentals. Return on invested capital is the ratio of current-period net income to average two-period invested capital. View historical data on Caterpillar and its competitors. For the Farm & Heavy Construction Machinery industry, the median ROIC % is 5.47 — values significantly above this may indicate overvaluation, while values below may suggest a bargain or underlying issues. Caterpillar's current ROIC % is 13.32%. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Caterpillar stock overvalued right now?
Caterpillar (XSWX:CAT) has a current ROIC % of 13.32%. The stock's GF Value™ is CHF339.83, compared to a current price of CHF809.34 — trading 138.2% above its estimated fair value. The current ROIC % is 13.32% and 143.5% above the Farm & Heavy Construction Machinery industry median of 5.47. Caterpillar's overall GF Score™ is 83/100 with 6 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is ROIC % calculated?
ROIC % is calculated from a company's financial statements. For Caterpillar (XSWX:CAT), the current ROIC % is 13.32% as of Mar. 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Caterpillar (XSWX:CAT) Overvalued in 2026?
Based on GuruFocus' analysis, Caterpillar stock appears to be overvalued.
The current stock price of CHF809.34 is trading 138.2% above its estimated GF Value™ of CHF339.83.
Key valuation signals for XSWX:CAT:
ROIC %: 13.32%
GF Value™: CHF339.83 vs. price of CHF809.34 (138.2% above fair value)
Industry Position: 143.5% above the Farm & Heavy Construction Machinery median
No single metric tells the full story. See the XSWX:CAT stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Caterpillar is the world's leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Its reporting segments are construction, resource, energy, and transportation. Market share approaches 20% across many products. Caterpillar operates a captive finance subsidiary to facilitate sales. The firm has a global reach that is approximately evenly balanced between the US and the rest of the world. Construction skews more domestic, while the other divisions are more geographically diversified. An independent network of over 150 dealers operates approximately 2,800 facilities, giving Caterpillar reach into about 190 countries for sales and support services.
83GF Score
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