Common Stock Valuation Ratios (Price Multiples)
Valuation ratios measure the quantity of an asset or flaw (e.g., earnings) associated with ownership of a specified claim (e.g., a share of ownership of the enterprise).
Current Valuation Ratios
Cummins Inc., current price multiples
| Cummins Inc. | Boeing Co. | Caterpillar Inc. | Eaton Corp. plc | GE Aerospace | Honeywell International Inc. | Lockheed Martin Corp. | RTX Corp. | Capital Goods | Industrials | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||
| Current share price (P) | $280.29 | ||||||||||||
| No. shares of common stock outstanding | 136,779,875 | ||||||||||||
| Growth rate (g) | 16.63% | ||||||||||||
| Earnings per share (EPS) | $5.37 | ||||||||||||
| Next year expected EPS | $6.27 | ||||||||||||
| Operating profit per share | $12.87 | ||||||||||||
| Sales per share | $249.05 | ||||||||||||
| Book value per share (BVPS) | $64.70 | ||||||||||||
| Valuation Ratios (Price Multiples) | |||||||||||||
| Price to earnings (P/E) | 52.16 | 72.33 | 28.65 | 31.09 | 37.37 | 14.48 | 26.53 | 38.46 | 35.93 | 31.58 | |||
| Price to next year expected earnings | 44.72 | 14,115.31 | 21.68 | 28.48 | 36.73 | 12.67 | 19.39 | 37.69 | 34.31 | 29.18 | |||
| Price-earnings-growth (PEG) | 3.14 | — | 0.89 | 3.40 | 21.46 | 1.02 | 0.72 | 18.66 | 7.62 | 3.84 | |||
| Price to operating profit (P/OP) | 21.77 | 31.93 | 22.82 | 24.39 | 29.52 | 12.29 | 17.22 | 27.84 | 32.03 | 26.41 | |||
| Price to sales (P/S) | 1.13 | 1.53 | 3.98 | 4.63 | 7.68 | 1.83 | 1.77 | 2.92 | 3.24 | 2.61 | |||
| Price to book value (P/BV) | 4.33 | 25.06 | 11.94 | 6.54 | 17.41 | 4.93 | 19.80 | 3.97 | 9.94 | 8.70 | |||
Based on: 10-K (reporting date: 2023-12-31).
If the company price multiple is lower then the price multiple of benchmark then company stock is relatively undervalued.
Otherwise, if the company price multiple is higher then the price multiple of benchmark then company stock is relatively overvalued.
Historical Valuation Ratios (Summary)
Cummins Inc., historical price multiples
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
An analysis of valuation multiples from 2019 to 2023 reveals significant volatility in earnings-based ratios, contrasted by relative stability in sales and book value multiples.
- Price to Earnings (P/E) Ratio
- The P/E ratio experienced substantial fluctuations, starting at 10.92 in 2019 and reaching a peak of 49.57 in 2023. Following a sharp increase in 2020 to 20.23, the ratio corrected to 14.94 in 2021 and 16.33 in 2022 before undergoing a dramatic expansion in the final year of the period.
- Price to Operating Profit (P/OP) Ratio
- The P/OP ratio followed a trajectory similar to the P/E ratio, rising from 9.14 in 2019 to 20.69 in 2023. While it mirrored the 2020 peak and subsequent 2021 correction, the expansion in 2023 was significantly less aggressive than that observed in the P/E ratio, suggesting a divergence between operating profit and net income.
- Price to Sales (P/S) Ratio
- The P/S ratio exhibited a peak in 2020 at 1.83, followed by a consistent downward trend over the next three years. By December 31, 2023, the ratio had declined to 1.07, nearly returning to the 2019 baseline of 1.05.
- Price to Book Value (P/BV) Ratio
- The P/BV ratio demonstrated a general upward trend, increasing from 3.29 in 2019 to 4.12 in 2023. Despite a temporary decline in 2021 to 3.76, the ratio remained consistently higher than the initial 2019 value, indicating a sustained increase in the market valuation of the company's net assets.
The divergent trends observed in 2023, specifically the sharp spike in the P/E ratio coupled with a returning to baseline in the P/S ratio, indicate that the valuation expansion was not driven by revenue growth. This pattern suggests a significant contraction in net earnings relative to the stock price or a substantial shift in market expectations regarding future profitability.
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Price to Earnings (P/E)
Cummins Inc., historical P/E calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 141,856,847 | 141,375,256 | 142,426,735 | 147,657,584 | 150,269,665 | |
| Selected Financial Data (US$) | ||||||
| Net income attributable to Cummins Inc. (in millions) | 735) | 2,151) | 2,131) | 1,789) | 2,260) | |
| Earnings per share (EPS)2 | 5.18 | 15.21 | 14.96 | 12.12 | 15.04 | |
| Share price1, 3 | 256.85 | 248.41 | 223.51 | 245.11 | 164.30 | |
| Valuation Ratio | ||||||
| P/E ratio4 | 49.57 | 16.33 | 14.94 | 20.23 | 10.92 | |
| Benchmarks | ||||||
| P/E Ratio, Competitors5 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 15.55 | 19.15 | 16.82 | — | — | |
| Eaton Corp. plc | 35.88 | 27.93 | 27.77 | — | — | |
| GE Aerospace | 16.18 | — | — | — | — | |
| Honeywell International Inc. | 22.73 | 26.97 | 23.14 | — | — | |
| Lockheed Martin Corp. | 15.35 | 20.48 | 16.70 | — | — | |
| RTX Corp. | 38.31 | 27.59 | 36.79 | — | — | |
| P/E Ratio, Sector | ||||||
| Capital Goods | 25.10 | 40.21 | 57.31 | — | — | |
| P/E Ratio, Industry | ||||||
| Industrials | 24.85 | 36.06 | 35.59 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Data adjusted for splits and stock dividends.
2 2023 Calculation
EPS = Net income attributable to Cummins Inc. ÷ No. shares of common stock outstanding
= 735,000,000 ÷ 141,856,847 = 5.18
3 Closing price as at the filing date of Cummins Inc. Annual Report.
4 2023 Calculation
P/E ratio = Share price ÷ EPS
= 256.85 ÷ 5.18 = 49.57
5 Click competitor name to see calculations.
The valuation metrics from 2019 to 2023 indicate a divergent trend between equity pricing and fundamental earnings performance. While the share price has maintained a general upward trajectory, earnings per share experienced a severe contraction in the final year of the period, leading to a significant expansion of the price-to-earnings multiple.
- Share Price Performance
- The share price increased from US$ 164.30 in 2019 to US$ 256.85 in 2023. Despite a temporary decline to US$ 223.51 in 2021, the overall trend reflects a consistent appreciation in market value over the five-year period.
- Earnings Per Share (EPS) Trends
- Earnings remained relatively stable between 2019 and 2022, fluctuating within a range of US$ 12.12 to US$ 15.21. However, a sharp decline occurred in 2023, with EPS falling to US$ 5.18, representing a significant reduction in profitability per share compared to the preceding four years.
- Price-to-Earnings (P/E) Ratio Analysis
- The P/E ratio exhibited substantial volatility, rising from 10.92 in 2019 to a peak of 49.57 in 2023. This surge is primarily attributable to the combination of a record high share price and the sharp decrease in EPS. The current ratio suggests a valuation that is no longer closely aligned with immediate earnings levels, which may indicate market expectations of future earnings recovery or a temporary impairment of current period profitability.
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Price to Operating Profit (P/OP)
Cummins Inc., historical P/OP calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 141,856,847 | 141,375,256 | 142,426,735 | 147,657,584 | 150,269,665 | |
| Selected Financial Data (US$) | ||||||
| Operating income (in millions) | 1,761) | 2,929) | 2,706) | 2,269) | 2,700) | |
| Operating profit per share2 | 12.41 | 20.72 | 19.00 | 15.37 | 17.97 | |
| Share price1, 3 | 256.85 | 248.41 | 223.51 | 245.11 | 164.30 | |
| Valuation Ratio | ||||||
| P/OP ratio4 | 20.69 | 11.99 | 11.76 | 15.95 | 9.14 | |
| Benchmarks | ||||||
| P/OP Ratio, Competitors5 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 12.40 | 16.25 | 15.87 | — | — | |
| Eaton Corp. plc | 29.72 | 22.78 | 19.33 | — | — | |
| GE Aerospace | 27.11 | 19.88 | 17.46 | — | — | |
| Honeywell International Inc. | 18.15 | 20.84 | 20.68 | — | — | |
| Lockheed Martin Corp. | 12.49 | 14.06 | 11.56 | — | — | |
| RTX Corp. | 34.37 | 26.48 | 28.68 | — | — | |
| P/OP Ratio, Sector | ||||||
| Capital Goods | 22.37 | 25.20 | 22.96 | — | — | |
| P/OP Ratio, Industry | ||||||
| Industrials | 20.78 | 19.86 | 22.38 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Data adjusted for splits and stock dividends.
2 2023 Calculation
Operating profit per share = Operating income ÷ No. shares of common stock outstanding
= 1,761,000,000 ÷ 141,856,847 = 12.41
3 Closing price as at the filing date of Cummins Inc. Annual Report.
4 2023 Calculation
P/OP ratio = Share price ÷ Operating profit per share
= 256.85 ÷ 12.41 = 20.69
5 Click competitor name to see calculations.
Between 2019 and 2023, the Price to Operating Profit (P/OP) ratio exhibited significant volatility, characterized by a general upward trajectory that culminated in a sharp increase during the final period.
- Share Price Trends
- The share price experienced an overall increase from 164.30 US$ in 2019 to 256.85 US$ in 2023. Despite a moderate contraction in 2021, the stock valuation maintained a general upward trend throughout the five-year window.
- Operating Profit per Share Performance
- Operating profit per share demonstrated inconsistent growth. After an initial decline in 2020, profits recovered and peaked at 20.72 US$ in 2022. A substantial reversal occurred in 2023, with the value falling to 12.41 US$, marking the lowest operating profit per share in the observed period.
- P/OP Ratio Dynamics
- The P/OP ratio escalated from 9.14 in 2019 to 20.69 in 2023. An initial spike was observed in 2020, coinciding with rising share prices and falling profits. While the ratio remained relatively stable between 2021 and 2022, it surged in 2023. This final expansion was driven by a divergence in performance, as the share price reached its five-year high while operating profits per share declined sharply, resulting in a significantly higher valuation multiple.
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Price to Sales (P/S)
Cummins Inc., historical P/S calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 141,856,847 | 141,375,256 | 142,426,735 | 147,657,584 | 150,269,665 | |
| Selected Financial Data (US$) | ||||||
| Net sales (in millions) | 34,065) | 28,074) | 24,021) | 19,811) | 23,571) | |
| Sales per share2 | 240.14 | 198.58 | 168.66 | 134.17 | 156.86 | |
| Share price1, 3 | 256.85 | 248.41 | 223.51 | 245.11 | 164.30 | |
| Valuation Ratio | ||||||
| P/S ratio4 | 1.07 | 1.25 | 1.33 | 1.83 | 1.05 | |
| Benchmarks | ||||||
| P/S Ratio, Competitors5 | ||||||
| Boeing Co. | 1.66 | 1.90 | 1.87 | — | — | |
| Caterpillar Inc. | 2.52 | 2.27 | 2.26 | — | — | |
| Eaton Corp. plc | 4.98 | 3.31 | 3.03 | — | — | |
| GE Aerospace | 2.30 | 1.20 | 1.50 | — | — | |
| Honeywell International Inc. | 3.51 | 3.78 | 3.73 | — | — | |
| Lockheed Martin Corp. | 1.57 | 1.78 | 1.57 | — | — | |
| RTX Corp. | 1.78 | 2.14 | 2.21 | — | — | |
| P/S Ratio, Sector | ||||||
| Capital Goods | 2.26 | 2.09 | 2.09 | — | — | |
| P/S Ratio, Industry | ||||||
| Industrials | 2.06 | 1.80 | 2.07 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Data adjusted for splits and stock dividends.
2 2023 Calculation
Sales per share = Net sales ÷ No. shares of common stock outstanding
= 34,065,000,000 ÷ 141,856,847 = 240.14
3 Closing price as at the filing date of Cummins Inc. Annual Report.
4 2023 Calculation
P/S ratio = Share price ÷ Sales per share
= 256.85 ÷ 240.14 = 1.07
5 Click competitor name to see calculations.
The Price-to-Sales (P/S) ratio demonstrates a cyclical pattern over the five-year period from 2019 to 2023, characterized by a sharp valuation expansion in 2020 followed by a steady contraction toward baseline levels.
- P/S Ratio Trajectory
- The P/S ratio rose from 1.05 in 2019 to a peak of 1.83 in 2020. Subsequently, a consistent downward trend occurred, with the ratio decreasing to 1.33 in 2021, 1.25 in 2022, and finishing at 1.07 in 2023. This movement suggests a return to the valuation multiples observed at the start of the period.
- Revenue Performance per Share
- Sales per share exhibited a dip in 2020, falling to 134.17 from 156.86 in 2019. Following this decline, a sustained upward trend was observed, with sales per share growing to 168.66 in 2021, 198.58 in 2022, and reaching 240.14 in 2023, representing a significant increase in revenue efficiency per share.
- Analysis of Valuation Drivers
- The peak in the P/S ratio during 2020 resulted from the divergence between a rising share price and declining sales per share. The subsequent compression of the ratio from 2021 through 2023 was driven by the fact that sales per share growth outpaced the growth in share price. While the share price increased from 223.51 in 2021 to 256.85 in 2023, the sales per share grew more aggressively, effectively lowering the multiple the market paid for each dollar of revenue.
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Price to Book Value (P/BV)
Cummins Inc., historical P/BV calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| No. shares of common stock outstanding1 | 141,856,847 | 141,375,256 | 142,426,735 | 147,657,584 | 150,269,665 | |
| Selected Financial Data (US$) | ||||||
| Total Cummins Inc. shareholders’ equity (in millions) | 8,850) | 8,975) | 8,474) | 8,062) | 7,507) | |
| Book value per share (BVPS)2 | 62.39 | 63.48 | 59.50 | 54.60 | 49.96 | |
| Share price1, 3 | 256.85 | 248.41 | 223.51 | 245.11 | 164.30 | |
| Valuation Ratio | ||||||
| P/BV ratio4 | 4.12 | 3.91 | 3.76 | 4.49 | 3.29 | |
| Benchmarks | ||||||
| P/BV Ratio, Competitors5 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 8.25 | 8.09 | 6.62 | — | — | |
| Eaton Corp. plc | 6.07 | 4.04 | 3.63 | — | — | |
| GE Aerospace | 5.43 | 2.43 | 2.64 | — | — | |
| Honeywell International Inc. | 8.11 | 8.02 | 6.91 | — | — | |
| Lockheed Martin Corp. | 15.54 | 12.67 | 9.62 | — | — | |
| RTX Corp. | 2.05 | 1.97 | 1.95 | — | — | |
| P/BV Ratio, Sector | ||||||
| Capital Goods | 6.94 | 5.31 | 4.77 | — | — | |
| P/BV Ratio, Industry | ||||||
| Industrials | 6.85 | 5.50 | 5.44 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Data adjusted for splits and stock dividends.
2 2023 Calculation
BVPS = Total Cummins Inc. shareholders’ equity ÷ No. shares of common stock outstanding
= 8,850,000,000 ÷ 141,856,847 = 62.39
3 Closing price as at the filing date of Cummins Inc. Annual Report.
4 2023 Calculation
P/BV ratio = Share price ÷ BVPS
= 256.85 ÷ 62.39 = 4.12
5 Click competitor name to see calculations.
An analysis of the valuation multiples reveals that the market premium over the company's book value expanded overall between 2019 and 2023, despite fluctuations in the intervening years.
- Price to Book Value (P/BV) Ratio
- The P/BV ratio increased from 3.29 in 2019 to 4.12 in 2023. A significant peak was observed in 2020 at 4.49, followed by a correction to 3.76 in 2021. From 2021 through 2023, a steady upward trend resumed, indicating a growing market valuation relative to the net asset value.
- Share Price Dynamics
- The share price exhibited strong growth over the five-year period, rising from 164.30 in 2019 to 256.85 in 2023. The most pronounced increase occurred between 2019 and 2020, where the price rose to 245.11. Following a dip to 223.51 in 2021, the price recovered and trended upward through 2023.
- Book Value per Share (BVPS) Trend
- The book value per share demonstrated consistent growth from 2019 to 2022, increasing from 49.96 to 63.48. However, a slight reversal occurred in 2023, with the BVPS declining to 62.39, which contributed to the increase in the P/BV ratio for that year despite the share price growth.
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