The Home Depot vs. Caterpillar: HD stock's higher valuation vs. CAT appears counterintuitive

Last Updated: 12/2/2024

Caterpillar Appears To Be A Better Choice Compared To The Home Depot

CAT valuation (P/EBIT) is lower vs. HD, but CAT has performed better on growth and better on margins

This disconnect between valuation and financial performance implies that CAT could be a better buy 

 

The Home Depot valuation (P/EBIT) is higher compared to Caterpillar

HD vs. CAT P/EBIT Change In Last 3 Years: 25% vs. -31%

The Home Depot revenue growth is worse compared to Caterpillar

HD vs. CAT Revenue Growth:   Last Q: 0.6% vs. -3.6%; Last 12 Months: -1.8% vs. 2.5%; Last 3 Years Average: 4.9% vs. 17%

The Home Depot's EBIT margin expansion is worse compared to Caterpillar

HD vs. CAT EBIT Margin Change:   Last 3 Years: 0.9x vs. 1.6x

While Caterpillar appears to be the better choice today, how has its stock performed vs. The Home Depot in the past?

Since 2020, returns have been:

  • 188% for The Home Depot (HD)
  • 259% for Caterpillar (CAT) 
  • 139% for S&P 500 
  • 560% for Trefis Multi-Strategy Portfolio 

Making Sense Of Counterintuitive Comparisons

Concepts, FAQ, And Things You May Want To Know

[1] What Is The Purpose Of Counterintuitive Comparisons?

[2] How Do You Find These Counterintuitive Pairs?

[3] If I Were To Decide Based On Counterintuitive Comparisons, How Likely Is It That I Will Make The Right Pick?

[4] Where Can I See More Such Counterintuitive Comparisons?

[5] I Don't Want To Go Through Multiple Comparisons, Can You Simplify Investment Decision For Me?

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