CMI
Cummins Inc.
$556.75
Platform & Compounding FCF
50%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 33.6% above fair value
You pay
$556.75
Bear
$289.53
Fair
$416.87
Bull
$545.79
Bear
$289.53
-48.0%
7% stage 1 growth, 11% discount
Fair
$416.87
-25.1%
11% stage 1 growth, 11% discount
Bull
$545.79
-2.0%
15% stage 1 growth, 11% discount
Adjust Assumptions
11.2%
11.0%
3.0%
Key Value Driver
FCF growth rate (11% base case)
Terminal Value % of EV
40%
Implied Market Multiple
30.9x
Market is pricing in (growth)
14.8%
vs 11.2% base
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (51 analysts)
$787.50
Divergence from AlphaVal
47%
Summary
Using a two-stage FCF DCF with 11% growth decelerating over 15 years, discounted at 11%, the base-case intrinsic value is $416.87 per share.
Warnings
Wall Street's average price target is $787.50 (from 51 analysts). Our estimate is 47% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions