PE and Earnings
PE is a ratio used to measure the relative position of earnings against stock price. It is a ratio and not an absolute number.
It we assume that the TSE trades at approx. 15 times price to forward earnings, then on a relative basis CAT's low PE ratio would indicate the possibility for share price appreciation.
Example:(Assumes each quarter for the year is the same as the last)
Basic earnings:
.19cents X 4 quarters= .76cents.
.76 X 15(TSE Multiple)= $11.40
Fully Diluted earnings:
.07cents X 4 quarters= .28cents.
.28cents X 15(TSE Multiple)= $4.20
This tells me there could be value at this share price level.
Value does not mean that a stocks share price will rise. S-T is a classic example of low PE and no price movement.
CAT is more of a small cap, which traditionally has meant that it should have a higher PE to the balance of the market, to price into the stock it's higher growth potential. The flip side is that CAT stated in it's press release that drilling could be down 20-25% which could hurt future earnings.