At this point, Caterpillar (NYSE:CAT) looks almost absurdly cheap. Caterpillar earnings doubled in 2017, and are guided up close to 70% this year. Yet Caterpillar stock trades at just 11x EPS guidance, and the CAT stock price actually has declined 19% over the past year.

But CAT is a cyclical stock, which means investors need to consider much more than just one- and two-year growth periods. After all, Caterpillar earnings are rising 200%+ over two years but they had declined 60% over the previous four.

Revenue dropped each year over that period. It was the first time ever (including during the Great Depression) that Caterpillar sales had fallen for four consecutive years.

In theory, a cyclical stock like Caterpillar stock should be cheap at the top of the cycle. And the weakness in broad markets, along with an inverted yield curve, strongly suggests that the U.S. and global economies indeed are near a top.

If that’s the case, the CAT stock price isn’t nearly as cheap as it looks. But there are other factors to consider when it comes to Caterpillar stock. Three other key questions will help determine whether the market was right in selling off CAT or if the decline from January highs has created a buying opportunity.

1. Where Are We In the Cycle?

Again, the most important question for the CAT stock price is understanding where we are in the cycle. In theory, a cyclical like CAT or John Deere (NYSE:DE) should see its earnings multiple contract at the top of the cycle and expand at the bottom. That same phenomenon helps explain why chip stock Micron Technology (NASDAQ:MU) trades at less than 4x earnings.

Indeed, even when the CAT stock price hit multi-year lows in early 2016, the stock still traded at a high-teen multiple to what investors believed were depressed earnings.

Now, investors see something closer to a peak coming in 2019 or 2020 or worse if the economy turns. Few stocks have more political risk than CAT, as I wrote last month. And so the compressed multiple makes some sense.

Of course, that multiple only makes sense if the cycle actually is turning. And for all the worries in the market right now, there isn’t a lot of evidence that turn is coming yet. In fact, Caterpillar posted a blowout Q3, with operating profit growth of 41%. YTD, revenue in Asia has risen 36% – with particular strength in China

For investors who believe the recent market sell-off is overdone, Caterpillar stock at least has to be given a long look.

2. Can Margins Go Any Higher?

From a cyclical standpoint, however, there is a concern in Caterpillar’s numbers. Operating margins are at a peak. In fact, they’re higher now than in 2012, when Caterpillar benefited from the so-called “commodity supercycle“.

For a cyclical stock, that’s not necessarily good news. Peak margins generally aren’t sustainable. Indeed, adjusted margins are 16.6% over the past four quarters, according to the company’s Q3 presentation. They were just 7.2% in 2016 – and averaged 11% over the past six years.

If those margins settle back in even the 13-14% range, earnings drop over 10%, and the CAT stock price looks closer to 13-14x earnings. That’s not far from the stock’s historical rang, and in that context Caterpillar stock isn’t all that cheap.

That said, it’s possible that margins can at least stay around current levels. Caterpillar took billions of dollars in cost out of the business over the past couple of years. Those costs have risen of late – Caterpillar has added flexible workers of late – but been leveraged by revenue growth.

As such, margins probably should be higher than even the salad days of 2011 and 2012. The question is how much higher and for how long.

3. Will Cost Cuts Have a Cost?

That said, one interesting question is whether those cost cuts will have an impact at some point. Caterpillar’s workforce dropped 20% between the end of 2013 and the end of 2017.

It’s risen 7% over the past year, as sales have rebounded. But Caterpillar still is making the same amount of revenue on the back of roughly 15% fewer workers.

Is that, itself, sustainable?

I’ve long worried it might not be but performance over the past seven quarters would seem to suggest otherwise. It’s possible if not likely at this point that Caterpillar simply is leaner. But even that means that there’s likely little room left for improvement and not much the company itself can do to move margins much higher.

4. Is Caterpillar Stock the Best Cyclical Play?

Overall, it does look from here like the CAT stock price is a bit too cheap. Even assuming the ~$12 EPS this year is benefiting from cyclical help, recent cost cuts look sustainable at this point. Tax reform has helped net profit as well. It’s not hard to model ‘mid-cycle’ EPS of $9-10, with a mid-teen multiple suggesting the CAT stock price should be in the $140 range, up ~10% or so from current levels.

The biggest issue, though, is whether Caterpillar stock is the best cyclical stock for investors who believe the sell-off has gone too far. As David Schawel pointed out on Twitter this week, cyclical stocks never have been as cheap on a relative basis as they are right now.

Construction industry stocks have been hammered, and several look cheap, including homebuilders like Lennar (NYSE:LEN) and distributors like GMS (NYSE:GMS) and Beacon Roofing Supply (NASDAQ:BECN). CAT is a bit of a China play at this point – and there’s no shortage of value stocks with exposure to that market.

A 2.7% dividend yield does help the case for Caterpillar stock, admittedly. Cyclical risk probably isn’t quite as large here. Still, there are a number of good, cheap cyclicals out there. Caterpillar stock is one of them. But I’m skeptical it’s the best or necessarily the cheapest.

As of this writing, Vince Martin is long shares of GMS Inc. He has no positions in any other securities mentioned.