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CMI — Cummins

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 9.76%
Profit Margins 7.89%
Return on Equity 21.99%
Return on Assets 7.27%
Free Float 0.14B
Dividend Yield 1.17%
Short Int % Utilisation 1.71%

2.2 Growth

Metric Value
Revenue Growth 2.7%
Free Cash Flow 1.69B
EBITDA 18.6 (Ratio)
Enterprise Value 93.08B
EV/Revenue 2.75
EV/EBITDA 18.6

Revenue growth of 2.7% suggests mature or challenged top-line momentum.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 72.14%
Risk / Std Dev (Ann.)* 36.32%
1-Year Price Return* 60.58%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $631.26
52-Week Range $389.52 – $737.76
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in US$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2025 FY2024
Revenue Reported revenue $33.67B $34.10B
Net income Reported net income $2.84B $3.95B
Total assets Year-end reported balance $33.99B $31.54B
Shareholders’ equity Year-end reported balance $12.35B $10.27B
Net margin Net income ÷ revenue 8.44% 11.57%
Asset turnover Revenue ÷ total assets 0.9905x 1.0812x
Equity multiplier Total assets ÷ shareholders’ equity 2.7526x 3.0708x
ROE Net margin × asset turnover × equity multiplier 23.02% 38.42%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $33.67B
Prior annual revenue $34.10B
EBIT $4.29B
Tax rate 25.38%
NOPAT = EBIT × (1 − tax rate) $3.20B
Forecast start-growth basis -1.27%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $3.20B
Add: depreciation & amortisation $1.10B
Less: capital expenditure -$1.24B
Less/(add): working-capital cash-flow movement -$861.00M
Current unlevered FCFF $2.21B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 -1.27% $3.16B $1.09B -$1.22B -$850.09M $2.18B $2.07B
2 -0.33% $3.15B $1.09B -$1.18B -$847.33M $2.21B $1.89B
3 0.62% $3.17B $1.09B -$1.16B -$852.55M $2.25B $1.74B
4 1.56% $3.22B $1.11B -$1.14B -$865.84M $2.32B $1.62B
5 2.50% $3.30B $1.14B -$1.14B -$887.49M $2.41B $1.52B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 1.25
Cost of equity 11.56%
Pre-tax cost of debt 4.19%
WACC 10.83%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $29.69B
Implied terminal EV / EBITDA 5.34x
Terminal value as % of enterprise value 66.73%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $8.85B
Present value of terminal value $17.75B
Indicated enterprise value $26.60B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $26.60B
Less: gross interest-bearing debt $8.11B
Add: cash and equivalents $3.61B
Add: affiliate investments $0.00
Less: minority interests $1.06B
Indicated common equity value $21.04B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 138,700,000.00
Share-count basis reported diluted weighted-average shares
Current market price $620.83
DCF indicative value per share $151.66
Indicative value vs. market price -75.57%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 3/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:27:22.982289 UTC; latest reported fiscal period: 2025-12-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Model basis: Daily issuer USD excess returns are regressed in-sample using ordinary least squares on matching regional Fama–French factors. FF3 estimates market, size, and value loadings; FF5 adds profitability and investment. Coefficients are descriptive historical exposures, not predictions.

Estimation input Value
Regional factor set US
Factor-return currency USD
Issuer-return basis USD adjusted total return
Estimation window 2025-08-19 to 2026-06-30
Aligned daily observations 217
Minimum observation requirement 120
Currency conversion for HK listings not required

Fama–French Three-Factor and Five-Factor Results

Diagnostic FF3 FF5
Annualised alpha 36.16% 23.34%
Adjusted R² 0.37 0.38
Annualised residual volatility 28.86% 28.46%
Factor loading (t-statistic) FF3 FF5
Market excess return (Mkt-RF) 1.78 (10.50) 1.59 (8.25)
Size (SMB) 0.03 (0.13) -0.11 (-0.43)
Value (HML) 0.64 (3.26) 0.69 (2.85)
Profitability (RMW) NM -0.50 (-2.45)
Investment (CMA) NM 0.17 (0.47)

Definitions: Mkt-RF is the market return less the risk-free rate; SMB is small minus big; HML is high minus low book-to-market; RMW is robust minus weak profitability; CMA is conservative minus aggressive investment. Factor returns are sourced from the Kenneth R. French Data Library; issuer adjusted-return history is sourced from Yahoo Finance. For Hong Kong listings, adjusted HKD prices are converted into USD with daily USD/HKD closes before return calculation to match the USD regional factor basis. This is an in-sample historical regression; coefficients and t-statistics do not establish causation or predict future returns. This is research and analysis only, not personalized financial advice.

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