Caterpillar, Inc. (CAT) vs Lockheed Martin Corporation (LMT): Which Is the Better Buy in 2026?
As of 2026-08-03, CAT is undervalued at $815, with a DCF intrinsic value of $423110766782 and a margin of safety of 100%. LMT is overvalued at $583, with an intrinsic value of $389 and a margin of safety of -50%. Of the two, CAT has the wider margin of safety.
Rewards
- ★Caterpillar, Inc. has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★Caterpillar, Inc. scores 75/100 on the Economic Moat Score (Wide Moat), with roic consistency as the strongest competitive dimension.
- ★Free cash flow has grown at a 13.0% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Lockheed Martin Corporation has maintained ROIC above 15% for 4 consecutive years, indicating a durable competitive advantage.
- ★Lockheed Martin Corporation scores 74/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
- ★Return on equity has consistently exceeded 20% over 4 years, indicating efficient use of shareholder capital.
Risks
- ⚠Trailing P/E of 40.7x is 103% above the historical average of 20.0x — the stock trades at a premium to its own history.
- ⚠High leverage (2.13x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
- ⚠7 insider sales totaling $77.6M with no purchases in the past 3 months — insiders are reducing their exposure.
- ⚠Gross margin of 11.8% is low, suggesting a competitive or commodity-like market with limited pricing power.
- ⚠High leverage (1.91x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $815?
The market implies -13.9% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding -11.1%, reflecting heavy growth investment expected to generate future returns.
What growth rate is the market pricing in at $583?
The market implies +13.2% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +11.9%, reflecting heavy growth investment.
Economic Moat Score
Learn more →Wide moat with strength across all dimensions. ROIC Consistency is the standout factor.
Wide moat driven primarily by revenue predictability. Margin Stability is the area most vulnerable to competitive pressure.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pricing this stock without strong emotion in either direction"
"Market is pricing this stock without strong emotion in either direction"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: CAT vs LMT
Is Caterpillar, Inc. or Lockheed Martin Corporation more undervalued in 2026?▼
Based on our discounted cash flow model, CAT trades at a 100.0% margin of safety (intrinsic value $423110766782 vs. price $815), compared to LMT's -49.8% margin of safety (intrinsic $389 vs. $583).
Which stock has a wider economic moat, Caterpillar, Inc. or Lockheed Martin Corporation?▼
CAT scores 75/100 (Wide moat), while LMT scores 74/100 (Wide moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Caterpillar, Inc. in financial distress?▼
CAT's Altman Z-Score of 2.2 places it in the Grey zone, signaling elevated bankruptcy risk. LMT scores 3.3 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which company has better free cash flow, Caterpillar, Inc. or Lockheed Martin Corporation?▼
Lockheed Martin Corporation (LMT) generates a 4.1% free cash flow yield, compared to Caterpillar, Inc.'s 0.0%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, Caterpillar, Inc. or Lockheed Martin Corporation?▼
LMT earns 24.8% ROIC versus CAT's 16.5%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Caterpillar, Inc.'s or Lockheed Martin Corporation's?▼
CAT's dividend earns a safety score of 94/100 (Very Safe), compared to LMT's 84/100 (Very Safe). CAT has raised its dividend for 3 consecutive years.