Intrinsic value of Cummins - CMI

Previous Close

$166.28

  Intrinsic Value

$283.28

stock screener

  Rating & Target

str. buy

+70%

Previous close

$166.28

 
Intrinsic value

$283.28

 
Up/down potential

+70%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CMI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Cummins (CMI) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -8.38
  26.20
  24.08
  22.17
  20.45
  18.91
  17.52
  16.27
  15.14
  14.13
  13.21
  12.39
  11.65
  10.99
  10.39
  9.85
  9.36
  8.93
  8.54
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
Revenue, $m
  17,509
  22,096
  27,417
  33,496
  40,348
  47,977
  56,382
  65,553
  75,478
  86,140
  97,522
  109,607
  122,379
  135,826
  149,936
  164,705
  180,129
  196,212
  212,959
  230,384
  248,501
  267,331
  286,898
  307,233
  328,367
  350,339
  373,187
  396,959
  421,700
  447,464
  474,305
Variable operating expenses, $m
 
  19,697
  24,429
  29,835
  35,927
  42,712
  50,186
  58,342
  67,167
  76,649
  86,770
  97,469
  108,827
  120,784
  133,332
  146,465
  160,181
  174,483
  189,376
  204,871
  220,981
  237,726
  255,127
  273,210
  292,003
  311,542
  331,860
  352,999
  375,000
  397,911
  421,780
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  15,581
  19,697
  24,429
  29,835
  35,927
  42,712
  50,186
  58,342
  67,167
  76,649
  86,770
  97,469
  108,827
  120,784
  133,332
  146,465
  160,181
  174,483
  189,376
  204,871
  220,981
  237,726
  255,127
  273,210
  292,003
  311,542
  331,860
  352,999
  375,000
  397,911
  421,780
Operating income, $m
  1,928
  2,399
  2,988
  3,661
  4,420
  5,265
  6,196
  7,211
  8,311
  9,491
  10,752
  12,138
  13,552
  15,042
  16,604
  18,240
  19,948
  21,729
  23,583
  25,513
  27,519
  29,605
  31,772
  34,023
  36,364
  38,797
  41,327
  43,960
  46,700
  49,553
  52,525
EBITDA, $m
  2,458
  3,048
  3,782
  4,621
  5,566
  6,618
  7,778
  9,043
  10,412
  11,883
  13,453
  15,120
  16,882
  18,737
  20,684
  22,721
  24,849
  27,068
  29,378
  31,782
  34,281
  36,878
  39,578
  42,383
  45,299
  48,329
  51,481
  54,761
  58,174
  61,728
  65,431
Interest expense (income), $m
  68
  61
  142
  235
  341
  461
  594
  742
  902
  1,076
  1,262
  1,461
  1,673
  1,896
  2,131
  2,378
  2,637
  2,906
  3,188
  3,481
  3,786
  4,103
  4,432
  4,774
  5,130
  5,500
  5,884
  6,284
  6,700
  7,133
  7,584
Earnings before tax, $m
  1,930
  2,338
  2,847
  3,427
  4,079
  4,804
  5,601
  6,470
  7,409
  8,416
  9,490
  10,677
  11,880
  13,145
  14,473
  15,861
  17,311
  18,822
  20,396
  22,032
  23,734
  25,502
  27,339
  29,249
  31,234
  33,297
  35,443
  37,676
  40,000
  42,420
  44,942
Tax expense, $m
  474
  631
  769
  925
  1,101
  1,297
  1,512
  1,747
  2,000
  2,272
  2,562
  2,883
  3,208
  3,549
  3,908
  4,283
  4,674
  5,082
  5,507
  5,949
  6,408
  6,886
  7,382
  7,897
  8,433
  8,990
  9,570
  10,172
  10,800
  11,453
  12,134
Net income, $m
  1,394
  1,707
  2,078
  2,501
  2,978
  3,507
  4,089
  4,723
  5,408
  6,143
  6,927
  7,794
  8,672
  9,596
  10,565
  11,579
  12,637
  13,740
  14,889
  16,083
  17,326
  18,616
  19,958
  21,352
  22,801
  24,307
  25,873
  27,503
  29,200
  30,967
  32,807

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,380
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  15,011
  17,209
  21,353
  26,087
  31,423
  37,365
  43,911
  51,054
  58,784
  67,087
  75,952
  85,364
  95,311
  105,783
  116,773
  128,275
  140,287
  152,813
  165,856
  179,427
  193,536
  208,201
  223,441
  239,278
  255,738
  272,849
  290,644
  309,158
  328,427
  348,492
  369,397
Adjusted assets (=assets-cash), $m
  13,631
  17,209
  21,353
  26,087
  31,423
  37,365
  43,911
  51,054
  58,784
  67,087
  75,952
  85,364
  95,311
  105,783
  116,773
  128,275
  140,287
  152,813
  165,856
  179,427
  193,536
  208,201
  223,441
  239,278
  255,738
  272,849
  290,644
  309,158
  328,427
  348,492
  369,397
Revenue / Adjusted assets
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
  1.284
Average production assets, $m
  4,103
  5,171
  6,416
  7,838
  9,441
  11,227
  13,193
  15,339
  17,662
  20,157
  22,820
  25,648
  28,637
  31,783
  35,085
  38,541
  42,150
  45,914
  49,833
  53,910
  58,149
  62,555
  67,134
  71,893
  76,838
  81,979
  87,326
  92,888
  98,678
  104,707
  110,987
Working capital, $m
  3,382
  2,895
  3,592
  4,388
  5,286
  6,285
  7,386
  8,587
  9,888
  11,284
  12,775
  14,358
  16,032
  17,793
  19,642
  21,576
  23,597
  25,704
  27,898
  30,180
  32,554
  35,020
  37,584
  40,248
  43,016
  45,894
  48,888
  52,002
  55,243
  58,618
  62,134
Total debt, $m
  1,856
  3,632
  6,019
  8,746
  11,820
  15,242
  19,013
  23,127
  27,579
  32,362
  37,468
  42,889
  48,619
  54,651
  60,981
  67,606
  74,526
  81,740
  89,253
  97,070
  105,197
  113,644
  122,422
  131,544
  141,025
  150,881
  161,131
  171,795
  182,894
  194,451
  206,492
Total liabilities, $m
  8,136
  9,912
  12,299
  15,026
  18,100
  21,522
  25,293
  29,407
  33,859
  38,642
  43,748
  49,169
  54,899
  60,931
  67,261
  73,886
  80,806
  88,020
  95,533
  103,350
  111,477
  119,924
  128,702
  137,824
  147,305
  157,161
  167,411
  178,075
  189,174
  200,731
  212,772
Total equity, $m
  6,875
  7,297
  9,054
  11,061
  13,324
  15,843
  18,618
  21,647
  24,924
  28,445
  32,204
  36,194
  40,412
  44,852
  49,512
  54,388
  59,482
  64,793
  70,323
  76,077
  82,059
  88,277
  94,739
  101,454
  108,433
  115,688
  123,233
  131,083
  139,253
  147,761
  156,624
Total liabilities and equity, $m
  15,011
  17,209
  21,353
  26,087
  31,424
  37,365
  43,911
  51,054
  58,783
  67,087
  75,952
  85,363
  95,311
  105,783
  116,773
  128,274
  140,288
  152,813
  165,856
  179,427
  193,536
  208,201
  223,441
  239,278
  255,738
  272,849
  290,644
  309,158
  328,427
  348,492
  369,396
Debt-to-equity ratio
  0.270
  0.500
  0.660
  0.790
  0.890
  0.960
  1.020
  1.070
  1.110
  1.140
  1.160
  1.180
  1.200
  1.220
  1.230
  1.240
  1.250
  1.260
  1.270
  1.280
  1.280
  1.290
  1.290
  1.300
  1.300
  1.300
  1.310
  1.310
  1.310
  1.320
  1.320
Adjusted equity ratio
  0.422
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424
  0.424

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,394
  1,707
  2,078
  2,501
  2,978
  3,507
  4,089
  4,723
  5,408
  6,143
  6,927
  7,794
  8,672
  9,596
  10,565
  11,579
  12,637
  13,740
  14,889
  16,083
  17,326
  18,616
  19,958
  21,352
  22,801
  24,307
  25,873
  27,503
  29,200
  30,967
  32,807
Depreciation, amort., depletion, $m
  530
  649
  794
  959
  1,146
  1,353
  1,582
  1,832
  2,102
  2,392
  2,702
  2,982
  3,330
  3,696
  4,080
  4,481
  4,901
  5,339
  5,794
  6,269
  6,762
  7,274
  7,806
  8,360
  8,935
  9,532
  10,154
  10,801
  11,474
  12,175
  12,906
Funds from operations, $m
  1,972
  2,356
  2,872
  3,461
  4,124
  4,860
  5,671
  6,555
  7,510
  8,535
  9,629
  10,776
  12,002
  13,292
  14,645
  16,060
  17,538
  19,079
  20,683
  22,352
  24,087
  25,890
  27,764
  29,711
  31,735
  33,839
  36,028
  38,304
  40,674
  43,142
  45,713
Change in working capital, $m
  37
  601
  697
  796
  898
  999
  1,101
  1,201
  1,300
  1,397
  1,491
  1,583
  1,673
  1,761
  1,848
  1,935
  2,021
  2,107
  2,194
  2,283
  2,373
  2,467
  2,563
  2,664
  2,769
  2,878
  2,993
  3,114
  3,241
  3,375
  3,516
Cash from operations, $m
  1,935
  1,755
  2,175
  2,665
  3,226
  3,861
  4,570
  5,353
  6,210
  7,139
  8,138
  9,193
  10,329
  11,530
  12,796
  14,126
  15,518
  16,972
  18,489
  20,069
  21,714
  23,424
  25,201
  27,048
  28,967
  30,961
  33,034
  35,190
  37,433
  39,767
  42,197
Maintenance CAPEX, $m
  0
  -477
  -601
  -746
  -911
  -1,098
  -1,305
  -1,534
  -1,784
  -2,054
  -2,344
  -2,654
  -2,982
  -3,330
  -3,696
  -4,080
  -4,481
  -4,901
  -5,339
  -5,794
  -6,269
  -6,762
  -7,274
  -7,806
  -8,360
  -8,935
  -9,532
  -10,154
  -10,801
  -11,474
  -12,175
New CAPEX, $m
  -594
  -1,068
  -1,245
  -1,422
  -1,603
  -1,785
  -1,967
  -2,146
  -2,322
  -2,495
  -2,663
  -2,828
  -2,989
  -3,146
  -3,302
  -3,456
  -3,609
  -3,763
  -3,919
  -4,077
  -4,239
  -4,406
  -4,579
  -4,758
  -4,945
  -5,141
  -5,347
  -5,562
  -5,790
  -6,029
  -6,281
Cash from investing activities, $m
  -917
  -1,545
  -1,846
  -2,168
  -2,514
  -2,883
  -3,272
  -3,680
  -4,106
  -4,549
  -5,007
  -5,482
  -5,971
  -6,476
  -6,998
  -7,536
  -8,090
  -8,664
  -9,258
  -9,871
  -10,508
  -11,168
  -11,853
  -12,564
  -13,305
  -14,076
  -14,879
  -15,716
  -16,591
  -17,503
  -18,456
Free cash flow, $m
  1,018
  210
  329
  496
  711
  978
  1,298
  1,673
  2,104
  2,590
  3,131
  3,712
  4,358
  5,054
  5,799
  6,590
  7,427
  8,308
  9,232
  10,198
  11,206
  12,256
  13,348
  14,483
  15,662
  16,885
  18,155
  19,474
  20,842
  22,264
  23,741
Issuance/(repayment) of debt, $m
  179
  2,064
  2,387
  2,727
  3,074
  3,423
  3,770
  4,114
  4,452
  4,783
  5,106
  5,421
  5,730
  6,032
  6,330
  6,625
  6,919
  7,215
  7,513
  7,817
  8,127
  8,447
  8,778
  9,122
  9,481
  9,856
  10,250
  10,664
  11,099
  11,558
  12,041
Issuance/(repurchase) of shares, $m
  -778
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -733
  2,064
  2,387
  2,727
  3,074
  3,423
  3,770
  4,114
  4,452
  4,783
  5,106
  5,421
  5,730
  6,032
  6,330
  6,625
  6,919
  7,215
  7,513
  7,817
  8,127
  8,447
  8,778
  9,122
  9,481
  9,856
  10,250
  10,664
  11,099
  11,558
  12,041
Total cash flow (excl. dividends), $m
  85
  2,274
  2,716
  3,223
  3,785
  4,400
  5,068
  5,787
  6,556
  7,373
  8,237
  9,133
  10,087
  11,086
  12,129
  13,215
  14,346
  15,522
  16,745
  18,014
  19,333
  20,703
  22,126
  23,605
  25,142
  26,741
  28,405
  30,137
  31,941
  33,821
  35,782
Retained Cash Flow (-), $m
  531
  -1,514
  -1,757
  -2,007
  -2,263
  -2,519
  -2,775
  -3,029
  -3,277
  -3,521
  -3,759
  -3,991
  -4,218
  -4,440
  -4,660
  -4,877
  -5,093
  -5,311
  -5,530
  -5,754
  -5,983
  -6,218
  -6,462
  -6,715
  -6,979
  -7,255
  -7,545
  -7,850
  -8,170
  -8,508
  -8,863
Prev. year cash balance distribution, $m
 
  1,092
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,853
  959
  1,216
  1,522
  1,881
  2,293
  2,759
  3,279
  3,852
  4,478
  5,142
  5,870
  6,646
  7,469
  8,338
  9,253
  10,212
  11,214
  12,260
  13,350
  14,485
  15,664
  16,890
  18,163
  19,486
  20,860
  22,288
  23,771
  25,314
  26,918
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,776
  878
  1,058
  1,254
  1,458
  1,664
  1,864
  2,049
  2,213
  2,348
  2,442
  2,505
  2,527
  2,508
  2,448
  2,351
  2,222
  2,065
  1,888
  1,696
  1,498
  1,300
  1,107
  925
  758
  609
  478
  368
  276
  203
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cummins Inc. designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products. The Company's segments include Engine, Distribution, Components and Power Systems. The Engine segment manufactures and markets a range of diesel and natural gas powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive and agricultural markets. The Distribution segment consists of the product lines, which service and/or distribute a range of products and services, including parts, engines, power generation and service. The Components segment supplies products, including aftertreatment systems, turbochargers, filtration products and fuel systems for commercial diesel applications. The Power Systems segment consists of businesses, including Power generation, Industrial and Generator technologies.

FINANCIAL RATIOS  of  Cummins (CMI)

Valuation Ratios
P/E Ratio 20.1
Price to Sales 1.6
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 14.5
Price to Free Cash Flow 20.9
Growth Rates
Sales Growth Rate -8.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.7%
Cap. Spend. - 3 Yr. Gr. Rate -4.3%
Financial Strength
Quick Ratio 5
Current Ratio 0
LT Debt to Equity 22.8%
Total Debt to Equity 27%
Interest Coverage 29
Management Effectiveness
Return On Assets 9.6%
Ret/ On Assets - 3 Yr. Avg. 12%
Return On Total Capital 15.7%
Ret/ On T. Cap. - 3 Yr. Avg. 16.2%
Return On Equity 19.5%
Return On Equity - 3 Yr. Avg. 19.9%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 25.4%
Gross Margin - 3 Yr. Avg. 25.5%
EBITDA Margin 14.4%
EBITDA Margin - 3 Yr. Avg. 16.7%
Operating Margin 11%
Oper. Margin - 3 Yr. Avg. 11.4%
Pre-Tax Margin 11%
Pre-Tax Margin - 3 Yr. Avg. 11.4%
Net Profit Margin 8%
Net Profit Margin - 3 Yr. Avg. 8%
Effective Tax Rate 24.6%
Eff/ Tax Rate - 3 Yr. Avg. 26.9%
Payout Ratio 48.5%

CMI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CMI stock intrinsic value calculation we used $17509 million for the last fiscal year's total revenue generated by Cummins. The default revenue input number comes from 2016 income statement of Cummins. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CMI stock valuation model: a) initial revenue growth rate of 26.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CMI is calculated based on our internal credit rating of Cummins, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cummins.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CMI stock the variable cost ratio is equal to 89.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CMI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.9% for Cummins.

Corporate tax rate of 27% is the nominal tax rate for Cummins. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CMI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CMI are equal to 23.4%.

Life of production assets of 8.6 years is the average useful life of capital assets used in Cummins operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CMI is equal to 13.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6875 million for Cummins - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 166.497 million for Cummins is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cummins at the current share price and the inputted number of shares is $27.7 billion.

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COMPANY NEWS

▶ 4 Stocks for the Late Bull Market   [06:00AM  Investopedia]
▶ Cummins X12 Wins Heavy-Duty Truckings Top 20 Award for 2018   [Feb-16-18 02:30PM  Business Wire]
▶ Cummins Inc. Declares Quarterly Common Stock Dividend   [Feb-13-18 05:15PM  Business Wire]
▶ Dunkin' Brands, Centene, Cummins, Fidelity National Earnings Top Views   [Feb-06-18 04:03PM  Investor's Business Daily]
▶ Cummins reports 4Q loss   [07:47AM  Associated Press]
▶ The Chart of Cummins Looks Bullish   [Jan-19-18 09:35AM  TheStreet.com]
▶ Cummins, FedEx, U of M launching global tech program at East's T-STEM Academy   [Jan-05-18 04:23PM  American City Business Journals]
▶ Cummins Releases New Generators in QuietConnect Series   [Dec-20-17 09:00AM  Business Wire]
▶ How Biofuels Will Change the Trucking Industry   [Dec-16-17 11:30AM  Motley Fool]
▶ Cummins Inc (CMI): Immense Growth Potential?   [Dec-11-17 12:48PM  Simply Wall St.]
▶ New Strong Buy Stocks for November 24th   [Nov-24-17 08:43AM  Zacks]
▶ ETFs with exposure to Cummins, Inc. : November 21, 2017   [Nov-21-17 11:29AM  Capital Cube]
▶ Tesla Plays the Long Game With Semi Truck   [Nov-17-17 11:09PM  The Wall Street Journal]
▶ The Biggest Loser: Tesla's Latest Victim?   [05:56PM  Barrons.com]
▶ Truck Stocks Slammed As Wal-Mart Orders 15 Tesla Semi Trucks   [04:06PM  Investor's Business Daily]
▶ Tesla's Truck Could Cause Industry Overhaul   [Nov-16-17 10:36AM  Barrons.com]
▶ Today's Top Supply Chain and Logistics News From WSJ   [06:24AM  The Wall Street Journal]
▶ 5 Safe Haven Dividend Plays   [06:00AM  Investopedia]
Financial statements of CMI
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