Cummins Inc. (NYSE:CMI) saw a decent share price growth of 17% on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading around its 52-week high. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. But what if there is still an opportunity to buy? Let's examine Cummins's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is Cummins Still Cheap?
The stock seems fairly valued at the moment according to our valuation model. It's trading around 15% below our intrinsic value, which means if you buy Cummins today, you'd be paying a reasonable price for it. And if you believe that the stock is really worth $366.90, then there's not much of an upside to gain from mispricing. Furthermore, Cummins's low beta implies that the stock is less volatile than the wider market.
What does the future of Cummins look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 58% over the next couple of years, the future seems bright for Cummins. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in CMI's positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven't 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 you've 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 it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Cummins, and understanding this should be part of your investment process.
If you are no longer interested in Cummins, 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.