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Company name Cummins Inc.
Stock ticker CMI
Live stock price [stckqut]CMI[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Poor
Sales growth Poor
EPS growth Poor
P/E growth Poor
EBIT growth Poor

ANALYSIS

Confident Investor Rating Poor
Target stock price (TWCA growth scenario) $76.8
Target stock price (averages with growth) $56.45
Target stock price (averages with no growth) $36.08
Target stock price (manual assumptions) $73.91

The following company description is from Google Finance: http://www.google.com/finance?q=cmi

Cummins Inc. is a manufacturer of diesel engines. The Company operates through four segments: Engine, Distribution, Components and Power Generation. Its Engine segment manufactures and markets a range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names for the heavy-and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive, agricultural and governmental equipment markets. Its Distribution segment consists of various businesses, which service and/or distribute a range of its products and services, such as parts and filtration, power generation, engines and service. Its Components segment supplies products, including after treatment systems, turbochargers, filtration products and fuel systems for commercial diesel applications. The Power Generation segment provides power generation systems, components and services for a customer base, including power solutions and mobile power solutions.

 

Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in Cummins Inc. I am removing the company from my Watch List

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of Cummins Inc. calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
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In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

  • Stock price at the time of the calculation: $110.61
  • Growth: 0.01
  • Current EPS (TTM): $7.55
  • P/E: 15
  • Future EPS Calc: $7.93
  • Future Stock Price Calc: $119.02
  • Target stock price: $73.9

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I hope that this makes you a Confident Investor.

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Cummins Inc. [stckqut]CMI[/stckqut] serves a well-established and growing market, a market that is central to our goods and economy. The company has a healthy financial situation in all aspects including debt and a well-covered dividend. The market is currently pricing in a dramatic decrease in revenue and income for the next year but estimates are predicting a much more muted decrease.

With diesel prices at levels lower than recent years, it allows the company to serve a more enticing market. Any slowing found in international markets is outdone by the massive growth seen in domestic markets which makes up a majority of the revenue anyway.

With cash steadily flowing in and a dividend that has plenty of room to run, I see this as an opportunity to initiate and accumulate shares of the company. The stock has fully valued share price of $130 while the market currently is pricing it in the high $90s. This separation of market pricing to valuation confirms for me that now is a time to add CMI to my portfolio.

Source: An Analysis Determining If Cummins Inc. Should Motor Its Way Into My Portfolio