Should You Investigate Cummins India Limited (NSE:CUMMINSIND) At ₹3,370?

Cummins India Limited (NSE:CUMMINSIND) received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹3,876 at one point, and dropping to the lows of ₹3,370. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cummins India's current trading price of ₹3,370 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cummins India’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Cummins India

Is Cummins India Still Cheap?

Cummins India is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Cummins India’s ratio of 51.03x is above its peer average of 37.11x, which suggests the stock is trading at a higher price compared to the Machinery industry. In addition to this, it seems like Cummins India’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Cummins India look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Cummins India's earnings over the next few years are expected to increase by 34%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in CUMMINSIND’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CUMMINSIND should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CUMMINSIND for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for CUMMINSIND, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Cummins India, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Cummins India and you'll want to know about this.

If you are no longer interested in Cummins India, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.