Cummins Inc (CMI, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $227.64, Cummins Inc has witnessed a decline of 2.14% over a period, marked against a three-month change of 6.92%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Cummins Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of Cummins Inc's GF Score:
- 1. Financial strength rank: 6/10
- 2. Profitability rank: 9/10
- 3. Growth rank: 9/10
- 4. GF Value rank: 9/10
- 5. Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability, growth, GF value, and momentum, and a decent rank in financial strength, GuruFocus assigned Cummins Inc the GF Score of 94 out of 100, which signals the highest outperformance potential.
Understanding Cummins Inc's Business
Cummins Inc, with a market cap of $32.24 billion and sales of $32.19 billion, is the top manufacturer of diesel engines used in commercial trucks, off-highway equipment, and railroad locomotives, in addition to standby and prime power generators. The company also sells powertrain components, which include transmissions, turbochargers, aftertreatment systems, and fuel systems. Despite robust competition across all its segments and increasing government regulation of carbon emissions, Cummins has maintained its leadership position in the industry. The company's operating margin stands at 9.45, reflecting its profitability.
Financial Strength Breakdown
According to the Financial Strength rating, Cummins Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Cummins Inc stands impressively at 9.11, underscoring its strong capability to cover its interest obligations. With a favorable Debt-to-Revenue ratio of 0.26, Cummins Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Cummins Inc's impressive standing among its peers in generating profit. Cummins Inc's strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Cummins Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 9.3%, which outperforms better than 59.62% of 2667 companies in the Industrial Products industry. Moreover, Cummins Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 4.9, and the rate over the past five years is 6.5. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Cummins Inc's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the importance of considering these key financial metrics when making investment decisions. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
