Cummins Inc. (NYSE:CMI) led the NYSE gainers with a relatively large price hike in the past couple of weeks. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stockâs share price. However, could the stock still be trading at a relatively cheap price? Letâs take a look at Cumminsâs outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Cummins
Is Cummins Still Cheap?
According to our valuation model, Cummins seems to be fairly priced at around 12% below our intrinsic value, which means if you buy Cummins today, youâd be paying a reasonable price for it. And if you believe the companyâs true value is $369.35, then thereâs not much of an upside to gain from mispricing. What's more, Cumminsâs share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from Cummins?
Future outlook is an important aspect when youâre looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that itâs 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' earnings over the next few years are expected to increase by 58%, 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? CMIâs optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we havenât considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If youâve been keeping tabs on CMI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means itâs worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Cummins, and understanding this should be part of your investment process.
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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.
About NYSE:CMI
Cummins
Designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide.
Established dividend payer with adequate balance sheet.