Due to the increased application of advanced technology and an increase in food supply, there is a strong chance that the agricultural equipment market will grow. Despite this, Caterpillar Although CAT is an iconic agricultural equipment maker, its current valuation makes it look overpriced. We believe investors who want to capitalize on industry tailwinds should instead invest in shares of CNH Industrial (NYSE 🙂 or Alamo Group(NYSE :). Let’s discuss.Caterpillar Inc.’s (NYSE:) multi-purpose agricultural machines include mini excavators, small dozers, and telehandlers. Peoria, Ill.-based business reported excellent financials for its second quarter ended June 30, 2002. It is expected that rising costs will affect its profitability in third quarter, which ends September 30, 2002. These 26.20% and 0.588% trailing-12-month net profit margins and asset turnover ratios are below the averages of 29.19%, 0.78% and 0.28% in the respective industries.

The stock has lost 12.3% in price over the past six months to close Friday’s trading session at $200.65. Morgan Stanley (NYSE:) analyst Courtney Yakavonis maintained an ‘Underweight’ rating on the stock. Also, in terms of forward EV/S ratio, CAT’s 2.73x is 36% higher than the 2.01x industry average. Additionally, CAT’s forward P/S of 2.18x is 37.1% lower than that industry average (1.59x). It may not make sense in the booming agricultural equipment market.

Due to the integration advanced technology and the supply shortage in the market for agricultural equipment, the market will grow rapidly in the next few months. Future Market Insights reports that the market for agricultural equipment worldwide will grow at a 4.8% annual rate between 2021-2031, reaching $65 Billion in 2021. So, we think investors looking to benefit from the industry’s growth could instead bet on quality agricultural equipment stocks CNH Industrial NV. (CNHI) and Alamo Group Inc . (ALG) instead.

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