Investopedia: Is Cummins Building For Bigger Things?

Modeling and assigning a fair value to Cummins (NYSE:CMI) is not a particularly easy task. It's hard to find a better company in the transportation components sector, not to mention the wider industrial sector as a whole. Through all of the cyclical ups and downs of the commercial vehicle market(s), Cummins almost always generates double-digit returns on invested capital and has managed to stay in the green with free cash flow.

So quality and ability to execute are not problems. What is the problem is estimating fair future growth rates. It seems hard to imagine that Cummins can match its trailing revenue growth rate of 12%, but countries like Brazil, China, and India are still seeing trucking operators building their fleets, while the move to natural gas could fuel demand not only for LNG/CNG engines, but also compression facilities and more equipment for the energy sector. Although I think the Street may be a little too optimistic on the free cash flow margin leverage Cummins can deliver, I'm increasingly thinking this is a good stock to own for the longer term.

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http://www.investopedia.com/stock-analysis/073113/cummins-building-bigger-things-cmi-nav-cat-wprt.aspx