Cummins Inc. (CMI) Company Analysis and Stock Recommendation
Investors looking for slight to moderate risk with a strong financial position and revenue growth while maintaining good cash flows should buy Cummins Incorporated stock. This recommendation is based on opportunity for revenue growth, positive stock performance, and debt measures.
Cummins Inc. is a global power leader that designs, manufactures, sells and services diesel engines and related technology around the world. Cummins serves its customers through its network of 500 company-owned and independent distributor facilities and more than 5,200 dealer locations in over 190 countries and ...view middle of the document...
6. The company posts a much lower than industry average debt to equity ratio of .2. This leads one to believe they are careful in what they use to finance their activities and do not heavily rely on debt to finance these things. The company also reported a 1.33B dollar increase in cash in 2013 after reporting a negative change of 115M dollars in 2012.
Cummins posts a gross profit margin of 25.3% which is lower than the industry average of 41.2%. CMI shows a greater year to year (6.9%) and 5 year (6.02%) revenue growth rate than the rest of its industry. This is not surprising considering the contracts and new products that are in Cummins’ future.
Return on Investment
CMI shows a much higher ROE and ROA than its industry. With the ROA percentage at 10.9% for CMI and 2.7% for the industry it is clear that CMI is making more money off of less investment meaning they are better using their assets. CMI has an ROE of 21% almost 10 points higher than the industry. This tells me that they are making more than enough money to take care of their investors.
The company is very dependent on rules and...