Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Cummins Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 6.0% to 8.8% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 61, DPO 61, DIO 86). At a 8.6% WACC with mid-year discounting, the terminal value (86% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.3x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $487.91 per share, suggesting CMI is fairly valued by 8.3% at the current price of $532.23.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 3,390 | 3,678 | 3,963 | 4,312 | 4,692 | 4,809 |
| (−) Net Interest | 309 | 336 | 362 | 393 | 428 | 439 |
| (+) D&A | 1,072 | 1,161 | 1,246 | 1,292 | 1,365 | 1,399 |
| EBITDA | 4,771 | 5,175 | 5,571 | 5,998 | 6,485 | 6,647 |
| (−) Tax | 913 | 991 | 1,067 | 1,161 | 1,264 | — |
| (−) CapEx | 1,235 | 1,340 | 1,444 | 1,571 | 1,709 | — |
| (−) ΔWC | -29 | 663 | 656 | 804 | 875 | — |
| Free Cash Flow (FCF) | 2,652 | 2,181 | 2,404 | 2,461 | 2,637 | — |
| Peers' EBITDA Multiple | 14.3x | |||||
| Terminal Value | 94,719 | |||||
| WACC / Discount Rate | 8.55% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,545 | 1,929 | 1,958 | 1,847 | 1,823 | 62,844 |
| Enterprise Value | 72,946 | |||||
| Projection Period | 10,102 | 13.8% | ||||
| Terminal Value | 62,844 | 86.2% | ||||
| (−) Current Net Debt | 5,269 | |||||
| Equity Value | 67,677 | |||||
| (÷) Outstanding Shares | 139M | |||||
| Fair Price | $488 | -8.3% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.2x | 12.2x | 14.2x | 16.2x | 18.2x |
|---|---|---|---|---|---|
| 6.6% | $396 | $466 | $535 | $605 | $675 |
| 7.6% | $378 | $444 | $511 | $578 | $644 |
| 8.6% | $361 | $424 | $488 | $552 | $615 |
| 9.6% | $345 | $405 | $466 | $527 | $588 |
| 10.6% | $329 | $387 | $445 | $503 | $561 |
Current price: $532.23. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.