Why Caterpillar Inc. Shareholders Have Something to Worry About

Deciding whether to buy or sell stock in Caterpillar Inc. (NYSE: CAT) raises one of the great investing conundrums: what to do with a stock that has strong earnings momentum, but whose current valuation is starting to look high on a historical basis. Let's take a look at the investment case for buying the stock and why the valuation should be giving investors cause for concern.

There's no doubt the company has a lot of positive momentum behind it, as it continues to beat estimates -- although this is partly due to internal guidance and commentary proving overly cautious. A case in point is management's guidance on revenue and earnings for 2017. For example, back in December, management argued that the analyst consensus for full-year 2017 revenue of $38 billion was reasonable but that the profit-per-share estimate of $3.25 was "too optimistic considering expected headwinds."

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Source: Fool.com