looking into the current session caterpillar inc nysecat is trading at 20112 after a 01 decrease over the past month the stock fell by 203 but over the past year it actually went up by 1212 with questionable shortterm performance like this and great longterm performance longterm shareholders might want to start looking into the companys pricetoearnings ratio assuming that all other factors are held constant this could present itself as an opportunity for shareholders trying to capitalize on the higher share price the stock is currently below from its 52 week high by 1847 the pe ratio is used by longterm shareholders to assess the companys market performance against aggregate market data historical earnings and the industry at large a lower pe can either represent a companys poor future earnings potential or a buying opportunity relative to other stocks it shows that shareholders are less than willing to pay a high share price because they do not expect the company to exhibit growth in terms of future earnings depending on the particular phase of a business cycle some industries will perform better than others compared to the aggregate pe ratio of the 2624 in the machinery industry caterpillar inc has a lower pe ratio of 2152 shareholders might be inclined to think that the stock might perform worse than its industry peers its also possible that the stock is undervalued price to earnings ratio is not always a great indicator of the companys performance depending on the earnings makeup of a company investors can become unable to attain key insights from trailing earnings