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Cummins Forward Rate of Return (Yacktman) %

: 12.16% (As of Jun. 2022)
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Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. Cummins's forward rate of return for was 12.16%.

The historical rank and industry rank for Cummins's Forward Rate of Return (Yacktman) % or its related term are showing as below:

CMI' s Forward Rate of Return (Yacktman) % Range Over the Past 10 Years
Min: 4.22   Med: 15.1   Max: 24.45
Current: 11.48

During the past 13 years, Cummins's highest Forward Rate of Return was 24.45. The lowest was 4.22. And the median was 15.10.

CMI's Forward Rate of Return (Yacktman) % is ranked better than
63.74% of 1848 companies
in the Industrial Products industry
Industry Median: 6.78 vs CMI: 11.48

Unlike the Earnings Yield %, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.


Cummins Forward Rate of Return (Yacktman) % Historical Data

The historical data trend for Cummins's Forward Rate of Return (Yacktman) % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Cummins Annual Data
Trend Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21
Forward Rate of Return (Yacktman) %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 8.56 12.53 16.45 16.43 13.93

Cummins Quarterly Data
Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22
Forward Rate of Return (Yacktman) % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 15.46 15.30 13.93 12.78 12.16

Competitive Comparison

For the Specialty Industrial Machinery subindustry, Cummins's Forward Rate of Return (Yacktman) %, along with its competitors' market caps and Forward Rate of Return (Yacktman) % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

Cummins Forward Rate of Return (Yacktman) % Distribution

For the Industrial Products industry and Industrials sector, Cummins's Forward Rate of Return (Yacktman) % distribution charts can be found below:

* The bar in red indicates where Cummins's Forward Rate of Return (Yacktman) % falls into.



Cummins Forward Rate of Return (Yacktman) % Calculation

Forward Rate of Return is a concept that Don Yacktman uses in his investment approach. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. He said in the interview (March 2012, when the S&P 500 was at about 1400):

If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.

The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).

Cummins's Forward Rate of Return of Jun. 2022 is

Forward Rate of Return=Normalized Free Cash Flow/Price+5-Year EBITDA Growth Rate
=11.75466667/193.53+0.0609
=12.16 %

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


Cummins  (NYSE:CMI) Forward Rate of Return (Yacktman) % Explanation

Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow of the past five years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.

For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over five years. The reason we use five years is to make it comparable to the growth rate.


Be Aware

In the Forward Rate of Return calculation, the growth rate is added directly to today's free cash flow yield. Therefore the calculation is reliable only if the company can grow at the same rate in the future as it did in the past. Investors should pay close attention to this when researching growth stocks. A more accurate measurement for return is Return on Capital.


Cummins Forward Rate of Return (Yacktman) % Related Terms

Thank you for viewing the detailed overview of Cummins's Forward Rate of Return (Yacktman) % provided by GuruFocus.com. Please click on the following links to see related term pages.


Cummins Business Description

Cummins logo
Industry
Address
500 Jackson Street, Box 3005, Columbus, IN, USA, 47202-3005
Cummins is the top manufacturer of diesel engines used in commercial trucks, off-highway equipment, and railroad locomotives, in addition to standby and prime power generators. The company also sells powertrain components, which include filtration products, transmissions, turbochargers, aftertreatment systems, and fuel systems. Cummins is in the unique position of competing with its primary customers, heavy-duty truck manufacturers, who make and aggressively market their own engines. Despite robust competition across all its segments and increasing government regulation of diesel emissions, Cummins has maintained its leadership position in the industry.
Executives
Peters Luther E officer: VP - Corporate Controller 500 JACKSON STREET COLUMBUS IN 47201
Fetch Bonnie J officer: VP - Supply Chain 500 JACKSON STREET COLUMBUS IN 47201
Wiltrout Jeffrey T officer: VP - Corporate Strategy 500 JACKSON STREET COLUMBUS IN 47201
Harris Carla A director 702 SW 8TH STREET BENTONVILLE AR 72716
Lamb-hale Nicole officer: VP - General Counsel 909 ROSE AVENUE SUITE 200 NORTH BETHESDA MD 20852
Newsome Earl officer: VP - Chief Information Officer 505 HUNTMAR PARK DR SUITE 300 HERNDON VA 20170
Brockhaus John D officer: VP-Human Resources Operations 500 JACKSON STREET COLUMBUS IN 47201
Narang Mahesh officer: VP & President - Components 500 JACKSON STREET COLUMBUS IN 47201
Chandler Mary T officer: VP - Corp. Resp. & Comm. Rel. 500 JACKSON STREET COLUMBUS IN 47201
Nelson Kimberly A director ONE GENERAL MILLS BLVD MINNEAPOLIS MN 55426
Davis Amy Rochelle officer: VP & Pres. - New Power Segment 500 JACKSON STREET COLUMBUS IN 47201
Stoner Nathan R officer: VP - China Area Business Org 500 JACKSON STREET COLUMBUS IN 47201
Kennedy Melina M officer: VP-Product Compl.-Reg. Affairs 301 EAST MARKET STREET INDIANAPOLIS IN 46204
Fier Walter J officer: VP - Chief Technical Officer 500 CENTRAL AVENUE COLUMBUS IN 47201
Quintos Karen H director ONE DELL WAY ROUND ROCK TX 78682

Cummins Headlines

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