CAT Valuation

Given last week's precipitous price decline I thought I'd do some quick valuation benchmarking.

Given CAT is not profitable, it's impossible to value it based on PE multiples. Though this fundamentally points to one of the catalysts for a re-rate. But hopefully that is for FY18.

The other way compare value is to look at EV/FY17 Sales ratios. Doing this you get the following comparisons:
Xero - 14x
Wisetech - 12x (Profitable)
Class - 11x (Profitable)
Aconnex - 5x
CAT - 4.3x

This pretty clearly shows CAT is sitting at the back off the pack when it comes to valuation. Aconnex was also recently smashed as the founders partially sold down their holdings and they downgraded guidance. It says to me CAT is undervalued.

It seems to be CAT is at a crossover point. Its not profitable, but soon could be! Its revenue growth has slowed, but its a much bigger business.

To me CAT has the potential to pop because based on the above it is undervalued, but its predicated on:
- Sustaining the high revenue growth of the elite business (proven, but can it be sustained?)
- Showing they've been able to boost the revenue growth of the video analytics business via cross sales (TBD)
- Showing there is a prosumer market (good progress, but unproven)
- Showing some $$ from the data monetisation (they've announced usage, NBL/State of Origin, but its not clear if this delivers any revenue)
- Profitability!

If some of the above are delivered, then there's cause for it to be valued in line with the likes of a WST, ACX or XRO. Data monetisation alone has the ability to drop $m's to the bottom line.

Even after last week, I'm keeping the faith!