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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Cummins Inc. (XNYS:CMI) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
CMI
Name:
CUMMINS INC. (XNYS:CMI)
Sector:
49.00M
Industry:
Specialty Industrial Machinery
CEO:
Mr. Norman Linebarger
Total Employees:
59,900
Our Technological Advancement Rating
Our Rating:
B
Technological advancement compared to industry is -15.68% lower
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF CUMMINS INC.(CMI) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND SPECIALTY INDUSTRIAL MACHINERY INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
212.87
One Month Price Target:
$214.09
Six Month Price Target :
$220.22
Likely Price in One Year's Time:
Ticker:
$227.57
Likely Trading Range Today Under (Normal Volatility)
$212.2
Price Upper limit ($) :
$213.73
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$203.74
This week:
$192.46
This month :
$172.05
Other Primary facts
Market Cap:
29.95B
Market Cap Classification:
Large Cap
Number of Shares
IPO Date:
140.99M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
21.15%
-11.78%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$255.22
$235.75
$170.52
$189.99
Medium risk (<10%) entry points
Buy Call
Sell Call
$229.42
Buy Put:
Sell Put:
$225.26
$196.27
$200.48
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
CMI
Sharpe Ratio:
1.70%
Comparison:
CMI, is amongst the top 40% stocks with highest risk-adjusted returns
Sharpe ratio is -10.41% lower than the industry
& is -25.53% lower than the market/S&P 500 average
Average Returns/Yield of
CMI
Daily returns:
0.04%
Weekly returns:
0.22%
Monthly returns:
0.89%
Yearly returns:
16.25%
Comparison of returns:
Average annual returns/yield (last 3 years) is -34.04% below industry average
Classification:
CMI, is amongst the top 60% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.43
Statistical test of Returns:
CMI has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
2.11%
Weekly Volatility:
4.72%
Monthly Volatility:
9.43%
Yearly Volatility:
32.68%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
0.54%
Volatility in last five trading days has been -74.44% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-4.29%
Weekly VaR:
-9.59%
Monthly VaR:
-19.17%
How Much Can the price of
CMI
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-16%
Worst case (decline):
-66.42%
This translates to price declining to:
$177.86
This translates to price declining to:
$71.48
Severe Crash Probability
Risk of crash in next 6/12 months: Medium (<50%)
What is Value at Risk (VaR)?
Risk Fundamentals
CMI is a 35.33% riskier investment compared to the market/S&P 500 & is 15.94% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is -22.90% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
CMI
Beta in relation to market/S&P 500--1.03
Expected beta in 1 year's time:
0.683
Expected beta in 3 year's time:
0.966
Unlevered (debt free) Beta:
0.76
Beta in relation to Nasdaq (XNAS):
0.615
Beta in relation to all global stocks::
0.649
Beta Comparison & Analysis
Beta of competitors/peers::
1.217
Beta is -15.60% lower than peers
Average Industry Beta:
1.281
Beta is -19.83% below industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
16.55%
Sustainable growth rate is 11.17% above industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.005
Alpha is -87.74% below industry average alpha yield
Alpha is 34% compared to market & is healthy
Analysis of Cost of Capital of
CMI
Equity cost of capital:
0.102
Equity cost of capital is -14.59% below industry mean WACC
Unlevered (without debt) cost of capital:
7.53%
Before-tax cost of debt:
2.18%
After-tax cost of debt:
1.73%
Overall debt rating:
Highest AAA investment grade
Weighted average cost of capital (WACC):
1.73%
WACC is -77.83% below industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$172.45
Revenue growth rate per share of (3Y):
3.21
Annual revenue growth rate is -30.46% below industry average
EPS:
$13.44
Expected Annual growth rate of EPS (3Y):
0.16%
Expected future EPS growth rate is -94.75% lower than the Specialty Industrial Machinery industry
Free cash flow (FCF) per share:
$8.96
Balance sheet equity growth per share: 27.36%
Equity growth rate per share is 153.44% higher than the industry
Debt per share
$27.15
EBITDA per share
$23.42
Valuation Analysis Today of
CMI
P/E Ratio:
14.9
P/E Ratio of Competitors/Peers:
30.97
P/E ratio is -51.90% lower than main peers & is -45.86% lower than the industry
Stock price/value with industry average P/E ratio: $369.79
CMI is -42.43% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $78.64
Present value of the expected future dividends only: $64.06
P/S (Price to Sales ratio):
1.23
Price to sales ratio is -70.25% below the industry mean
P/B (Price to book value ratio):
3.21
Price to free cash flow: 23.76
-
Net income growth rate (3Y):
12.50%
Net income growth rate is 828.92% higher than the average industry net income growth rate
Dividend Analysis
Dividend payout rate: 10.46%
Dividend yeild: 2.72%
Previous Dividend: $1.45
Previous adjusted dividend: $1.45
Previous Dividend: $5.80
Expected next dividend best case: $1.50
Expected next dividend worst case: $1.40
Average dividend payment (long-term): $1.37
Average dividend increase/decrease (growth rate) % per period: 1.04%
Expected next dividend payment date: 31/08/2022
Expected next dividend record date: 18/08/2022
Expected next dividend declaration date: 08/08/2022
Previous dividend payment date: 06/02/2022
Previous dividend record date: 20/05/2022
Previous dividend declaration date: 05/10/2022
Dividend History:
2022-05-19--$1.45
2021-11-18--$1.45
2021-05-20--$1.35
2022-02-17--$1.45
2021-08-19--$1.45
2021-02-18--$1.35
Dividend growth rate is -70.17% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
45.38%
Net debt to equity ratio:
27.29%
Debt to assets ratio:
15.87%
Net debt to assets ratio:
9.54%
Debt-to-asset ratio is -70.59% below industry average
Ability to repay debt:
Interest coverage ratio:
33.02
Interest coverage ratio is 69.20% more than industry average
Looking forward:
Debt growth rate:
-9.92%
Annual debt growth is -113% lower than industry average debt growth rate
Debt repayment rate in last quarter: 0.62%
Analysis of Key Statistics
Correlation of price movement with the market:
0.672
Statistical significance of correlation:
CMI has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.635
Stock price is 5.76% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.635
Correlation of price movement with Nasdaq (^IXIC):
-0.013
Covariance of price movement with the market:
-0.016
Kurtosis
16.82
Returns have severe fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are considerably more likely, compared to assets with normally distributed returns
Skewness of returns:
1.142
Returns are right (positive) skewed; mean returns are greater than median and mode returns
Fundamental Analysis & Dupont Analysis of
CMI
Gross Profit Margin Ratio:
94%
Operating Profit Margin Ratio:
10.28%
Operating profit margin is -142.46% lower than the industry
Net Profit Margin Ratio:
94%
Effective Tax Rate:
22.39%
Effective tax rate is 19.81% higher than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
23.46%
Return on equity (ROE) is 598.17% higher than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
8.20%
Return on assets (ROA) is 74.81% higher than the industry
Financial Leverage:
1.2x
Current Ratio:
1.68
Current ratio is -44.49% below industry average
Cash Conversion Cycle (days):
21.8
Cash conversion cycle is -64.51% below industry average
The remaining useful life of property plant & equipment is: 13.5 years
Stock based compensation to net income ratio:
0.25%
In-depth Efficiency Analysis
Revenue generated per employee:
405.9K
Each employee generates -90% less revenue than industry average revenue per employee
EBITDA generated per employee:
55.1K
Each employee generates -93% less EBITDA than industry average revenue per employee
Profit generated per employee:
33.0K
Each employee generates -92% less net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
0.8K
Each employee generates -98% less free cash flow than industry average revenue per employee
Assets/Capital per employee
192.4K
Each employee generates -98% less free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
Research & development (R&D) investment growth rate-- 20.31%
Growth rate in R&D investment/expenditure is 88.15% higher than the industry
Competitors/Peer firms of
CMI
WASTE CONNECTIONS, INC. (XNYS:WCN)
AMETEK, INC. (XNYS:AME)
EQUIFAX INC. (XNYS:EFX)
TRANSDIGM GROUP INCORPORATED (XNYS:TDG)
STANLEY BLACK & DECKER, INC. (XNYS:SWK)
ROCKWELL AUTOMATION, INC. (XNYS:ROK)
FERGUSON PLC (XNYS:FERG)
SOUTHWEST AIRLINES CO. (XNYS:LUV)
KANSAS CITY SOUTHERN (XMEX:KSU*)
Current Analyst Ratings
Strong buy�13%
Buy�17%
Hold�58%
Sell�4%
Strong sell�8%
Overall analyst sentiment is: Hold
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
24.31B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
18.57B
5.74B
1.13B
-
2.42B
-
66.00M
3.61B
105.00M
100.00M
653.00M
3.30B
2.50B
1.98B
2.55B
570.00M
1.98B
Statement of Cash Flow
Date:
Period:
161.00M
Differed Income Tax :
- 66000.00K
Stock Based Compensation :
5.00M
Change in Working Capital :
- 460000.00K
Accounts Receivables:
-
Other Working Capital:
-
Other Non-Cash Items:
101.00M
Net Cash Provided by Operating Activities:
164.00M
Investments in PP&E:
-
Net Acquisitions:
51.00M
Purchases of Investments:
- 199000.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
2.28B
527.00M
2.80B
4.37B
4.59B
839.00M
12.60B
4.82B
1.29B
917.00M
1.59B
494.00M
2.42B
11.53B
-
24.12B
3.50B
750.00M
437.00M
883.00M
2.38B
7.51B
3.83B
2.16B
7.25B
-
14.76B
2.41B
16.95B
- 1515000.0K
- 9412000.00K
March 31, 2022 at 6:00:00 AM
22.18B
8.44B
23.20B
2.12B
4.58B
2.3B
254.00M
- 116000.00K
- 10000.00K
- 24000.00K
9.00M
- 311000.00K
- 207000.00K
36.00M
- 497000.00K
27.00M
- 316000.00K
2.28B
2.59B
164.00M
- 115000.00K
49.00M
Our Proprietary Portfolio Rating
Our Rating:
D
Price Forecast/Expected Price in Next 5 Years of
CMI
2023
2024
2025
2026
2027
$228.71
$317.07
$338.96
$362.36
$387.38