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Is Cummins (CMI) Stock Undervalued Right Now?

Zacks Equity Research
Carnival (CCL) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Cummins (CMI) is a stock many investors are watching right now. CMI is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 9.57, which compares to its industry's average of 9.58. Over the past year, CMI's Forward P/E has been as high as 10.97 and as low as 8.07, with a median of 9.88.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CMI has a P/S ratio of 0.99. This compares to its industry's average P/S of 1.03.

Finally, investors will want to recognize that CMI has a P/CF ratio of 7.69. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CMI's P/CF compares to its industry's average P/CF of 7.69. Over the past 52 weeks, CMI's P/CF has been as high as 15.80 and as low as 7.57, with a median of 11.68.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Cummins is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CMI feels like a great value stock at the moment.


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