At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." The pinstripe-and-wingtip crowd is entitled to its opinions, but we have some pretty sharp stock pickers down here on Main Street, too. And we're not always impressed with how Wall Street does its job.

Perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Raymond James loves CATs
In this world, there are cat people and there are dog people. After taking a look at Caterpillar's (NYSE: CAT) latest update on dealer sales, investment banker Raymond James is declaring itself firmly in the feline camp and assigning the stock a "strong buy" rating this morning. Meanwhile, a lot of media outlets are looking at the same numbers and wondering whether Cat might be a dog of a stock. Who's right?

Caterpillar just reported a 52% rise in worldwide dealer sales of its mining, harvesting, and other heavy machinery. That sounds like news that should get folks grinning, but reporting on it this morning, Reuters instead made the dour observation that this number was "below the 66% growth for the three months ended in April" and "the slowest growth pace since January." The upshot is that although growth is good, Caterpillar is showing less and less of it as the year progresses.

In contrast, StreetInsider.com is reporting this morning that Raymond James likes the numbers quite a lot. Sales were particularly strong in the growth markets of Europe, Africa, and Middle East (where sales grew 65%) and Latin America (up 60%). Already on record with an "outperform" rating on the stock, Raymond pounded the table and, insisting that the stock's recent slide has been unwarranted, said Caterpillar is worth $135 a share if it's worth a dime.

I disagree.

Valuation matters
Don't get me wrong. I'm not a total Cat-skeptic. I admit that the stock's 17 P/E ratio doesn't seem particularly high, and I get why folks who look farther out and focus on Caterpillar's 11 forward P/E ratio might find that intriguing. After all, the S&P 500 as a whole costs 13.9 times forward earnings right now and carries a dividend yield not much higher than Cat's own 1.9% payout. When you have a dominant player on the market selling for cheaper than the market, I see how that can look attractive.

But consider: At 17 times trailing earnings today, Caterpillar actually sells at a premium to rivals Kubota (NYSE: KUB), CNH Global (NYSE: CNH), and Deere (NYSE: DE) -- which cost anywhere from 13.6 to 15.4 times earnings. Granted, none of these companies is expected to match Caterpillar's projected 22% annual five-year earnings growth rate. Then again, Caterpillar is already a $47 billion company, by annual sales. I have my doubts as to the ability of such a large company to continue outgrowing the S&P 500 by a factor of two over the next five years.

These doubts only increase when I note that the quality of Cat's earnings isn't especially good. At last report, only 61% of Cat's reported GAAP earnings were backed up by real free cash flow. It's not unique in this -- much smaller ag-equipment play Toro (NYSE: TTC) shows an almost identical relationship between free cash flow and reported earnings, while Deere is in worse shape than Caterpillar, showing negative free cash flow despite positive net income.

Still, Cat's FCF position is almost a mirror image of what we saw back in 2009, at the start of Cat's surge, when free cash flow was pouring in at a rate three times as fast as reported income. My worry is that what went up might also come down.

Foolish takeaway
Could I be wrong about this? Certainly. Caterpillar's been up more than 20% at points during 2011 and left its shareholders grinning like Cheshire Cats. But over longer periods, the stock has proved to be prone to remarkable downturns in fortune. Investors who place too much faith in Cat's supposed 22% growth rate might want to consult with Fools who accepted similarly rosy forecasts in 2008 as a given -- and suffered for it.