Cross-Sector Comparison: Is Caterpillar Stock A Better Pick Over J&J?

We believe that Caterpillar stock (NYSE: CAT) is a better pick than the pharmaceutical bellwether Johnson & Johnson stock (NYSE: JNJ), given its better prospects. Although these companies are from different sectors, we compare them because they have a similar P/EBIT ratio of 15x-17x. The decision to invest often comes down to finding the best stocks within the parameters of certain characteristics that suit an investment style. The size of profits can matter, as larger profits can imply greater market power. Since these stocks are from different sectors, comparing P/S against one another may not be helpful. We compare their current multiples with the historical ones in the sections below to better compare their valuations.

Looking at stock returns, CAT stock has fared slightly better, with a 2% rise this year, compared to a 9% fall for JNJ, but both have underperformed the broader S&P500 index, up 14%. There is more to the comparison, and in the sections below, we discuss the possible returns for Caterpillar
CAT
and J&J in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation in an interactive dashboard analysis of Caterpillar vs. Johnson & Johnson
JNJ
: Which Stock Is A Better Bet? Parts of the analysis are summarized below.