Cummins Inc (CMI) stock analysis

P/E above its 5-year median

Cummins's P/E of 19.3 is above its own 5-year median of 17.7.

P/E below the industry

Cummins's P/E of 19.3 is below the Industrial and Commercial Machinery and Computer Equipment median of 27.5.

EV/EBITDA above its 5-year median

Cummins's EV/EBITDA of 12.1 is above its 5-year median of 11.7.

P/B above the industry

Cummins's price-to-book of 4.78 is above the Industrial and Commercial Machinery and Computer Equipment median of 2.71.

Trading below fair value

The share price of $463.26 is below our fair value estimate of $519.41.

Margin of safety under 20%

The price is 10.8% below fair value, less than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 6.2% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 10.7% a year over the last three fiscal years.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing slower than the industry

Revenue grew 6.7% over the last twelve months; the Industrial and Commercial Machinery and Computer Equipment median is 10.1%.

Guidance raised

Cummins raised its full-year 2026 EBITDA outlook on Aug 4, 2026.

Gross margin improving

Gross margin was 25.9% over the last twelve months, against 25.6% a year earlier.

Return on equity

Needs positive equity and five years of results.

Return on capital over 10%

Return on invested capital was 21.4%, above the 10% that usually covers the cost of capital.

Return on equity against the industry

Needs positive equity.

Earnings over 5 years

Needs positive net income five years ago and in the latest year.

Net margin against its history

Needs five years of revenue and net income.

Net margin against the industry

Needs revenue and net income.

High debt

Debt is 53.5% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 49.6% five years ago to 53.5%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 66.5% of total debt.

Interest well covered

Operating income covers interest expense 14.1 times.

Short-term assets cover short-term debts

Current assets are 1.74 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 4.31; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Cummins paid dividends worth 1.8% of the share price over the last twelve months.

Yield below Treasuries

The 1.8% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Cummins yields 1.8%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 9 fiscal years.

Earnings cover

Needs dividends paid and net income.

Covered by free cash flow

Dividends take 32.7% of free cash flow.