CMI
Cummins Inc.
$639.55
Platform & Compounding FCF
50%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 32.7% above fair value
You pay
$639.55
Bear
$333.54
Fair
$481.97
Bull
$632.21
Bear
$333.54
-47.8%
7% stage 1 growth, 11% discount
Fair
$481.97
-24.6%
11% stage 1 growth, 11% discount
Bull
$632.21
-1.1%
15% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (11% base case)
Terminal Value % of EV
40%
Implied Market Multiple
38.9x
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $680.73 from 51 analysts, using a 35% weight on analyst consensus. That produces an estimated intrinsic value of $481.97 per share.
Warnings
Wall Street's average price target is $680.73 (from 51 analysts). Our estimate is 45% 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