Caterpillar Inc. (CAT) vs NextEra Energy, Inc. (NEE): Which Is the Better Buy in 2026?
As of 2026-06-19, CAT is overvalued at $986, with a DCF intrinsic value of $876 and a margin of safety of -13%. NEE is overvalued at $87, with an intrinsic value of $27 and a margin of safety of -224%. 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.
- ★Gross margin of 61.4% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Each dollar of retained earnings has created $3.56 of earning power — management is an exceptional capital allocator.
Risks
- ⚠FCF yield of 1.6% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Trailing P/E of 49.2x is 146% above the historical average of 20.0x — the stock trades at a premium to its own history.
- ⚠PEG ratio of 2.24 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
- ⚠NextEra Energy, Inc. scores only 24/100 on the Economic Moat Score, suggesting limited durable competitive advantages.
- ⚠High leverage (1.54x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
- ⚠Net debt/EBITDA of 7.2x indicates heavy leverage — it would take over 4 years of EBITDA to pay off net debt.
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 $986?
The market implies +21.7% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +24.1%, reflecting heavy growth investment.
Requires positive FCF to compute implied growth rate.
Economic Moat Score
Learn more →Wide moat with strength across all dimensions. ROIC Consistency is the standout factor.
No durable moat detected, though margin stability shows some competitive positioning. The business lacks consistent evidence of sustainable advantages.
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 optimistic — be cautious and ensure you have a margin of safety"
"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 NEE
Is Caterpillar Inc. or NextEra Energy, Inc. more undervalued in 2026?▼
Based on our discounted cash flow model, CAT trades at a -12.6% margin of safety (intrinsic value $876 vs. price $986), compared to NEE's -224.0% margin of safety (intrinsic $27 vs. $87).
Which stock has a wider economic moat, Caterpillar Inc. or NextEra Energy, Inc.?▼
CAT scores 75/100 (Wide moat), while NEE scores 24/100 (None moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is NextEra Energy, Inc. in financial distress?▼
NEE's Altman Z-Score of 1.1 places it in the Distress zone, signaling elevated bankruptcy risk. CAT scores 4.3 (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 NextEra Energy, Inc.?▼
Caterpillar Inc. (CAT) generates a 1.6% free cash flow yield, compared to NextEra Energy, Inc.'s -10.2%. 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 NextEra Energy, Inc.?▼
CAT earns 16.5% ROIC versus NEE's 3.9%. 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 NextEra Energy, Inc.'s?▼
CAT's dividend earns a safety score of 94/100 (Very Safe), compared to NEE's 54/100 (Borderline). CAT has raised its dividend for 3 consecutive years.