Today we're going to take a look at the well-established Cummins Inc. (NYSE:CMI). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The company is inching closer to its yearly highs following the recent share price climb. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Cummins’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Cummins

Is Cummins Still Cheap?

According to our valuation model, Cummins seems to be fairly priced at around 18% below our intrinsic value, which means if you buy Cummins today, you’d be paying a fair price for it. And if you believe the company’s true value is $368.58, then there’s not much of an upside to gain from mispricing. What's more, Cummins’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Cummins?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 58% over the next couple of years, the future seems bright for Cummins. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? CMI’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CMI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Cummins at this point in time. In terms of investment risks, we've identified 1 warning sign with Cummins, and understanding it should be part of your investment process.

If you are no longer interested in Cummins, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.