Cummins India (CUMMINSIND)

FairStock Score: 51/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 1/2 · Dividend: 0/1

Key Financials

Strengths

• Zero debt and strong cash generation: D/E of 0.00 with FCF of ₹1,105 crore.
• Excellent profitability: ROE of 29.65% and ROCE of 36.32% indicate a durable competitive position.
• Consistent growth: 5-year revenue CAGR of 18.97%; latest quarter sales at ₹3,055 Cr and net profit at ₹486 Cr.
• Healthy financials confirmed by Piotroski F-Score of 7/9 and Altman Z-Score of 10.69.
• Promoter holding of 51% aligns management with minority shareholders.

Concerns

• Extreme valuation: P/E of 58.30 and P/B of 18.98 are far above Graham Number of ₹704.51 and DCF value of ₹502.60.
• Margin of safety is deeply negative at -595.27%, leaving no room for error.
• PEG of 4.83 shows the current price is not justified by profit growth of 11.57%.
• Dividend yield of 1.05% is low; negative EV/EBITDA of -42.02 also needs closer scrutiny.

AI Analysis

Let me examine Cummins India the way Graham taught me. This is a high-quality business, no doubt. It earns 29.65% on equity and 36.32% on capital employed, carries zero debt, and converted its operations into free cash flow of ₹1,105 crore. A Piotroski score of 7/9 and an Altman Z-score of 10.69 confirm a fortress balance sheet. Promoters own 51%, so their interests are aligned with ours. Growth is real: revenue has compounded at nearly 19% over five years, and the latest quarter shows sales of ₹3,055 crore and net profit of ₹486 crore, with 13.31% sales growth and 11.57% profit growth. This is the kind of compounding machine I admire. But price matters. At ₹5,176.90, the stock trades at 58.3 times earnings and 18.98 times book value. Graham's number—a conservative measure of fair value—is only ₹704.51. Even a discounted cash-flow estimate based on the available figures gives ₹502.60, less than one-tenth of the market price. The margin of safety is deeply negative, around -595%. With a PEG ratio of 4.83, the market is paying too much for the current growth rate. Dividend yield of 1.05% offers little comfort while waiting. The negative EV/EBITDA is odd and makes me question whether conventional valuation metrics are being distorted by large cash; I would need the full balance sheet before trusting it. A great business can still be a bad investment at the wrong price. I would not buy at this level. I would put it on my watchlist and wait for a meaningful pullback or for earnings to grow into the valuation.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer