Trade-Ideas: Cummins (CMI) Is Today's Unusual Social Activity Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Cummins ( CMI) as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified Cummins as such a stock due to the following factors:

  • CMI has more that 20x the normal benchmarked social activity for this time of the day compared to its average of 1.87 mentions/day.
  • CMI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $310.0 million.

Identifying stocks with 'Unusual Social Activity' tends to be a valuable process for traders looking to capitalize on the 'talk of the town' stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn't matter if it's good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock's price trend.

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More details on CMI:

Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products. It operates in four segments: Engine, Components, Power Generation, and Distribution. The stock currently has a dividend yield of 2%. CMI has a PE ratio of 16.8. Currently there are 8 analysts that rate Cummins a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Cummins has been 1.3 million shares per day over the past 30 days. Cummins has a market cap of $23.7 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.76 and a short float of 2.1% with 1.57 days to cover. Shares are down 10.1% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cummins as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 19.1%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CMI's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CMI has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the Machinery industry average, but is less than that of the S&P 500. The net income increased by 0.8% when compared to the same quarter one year prior, going from $352.00 million to $355.00 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Machinery industry and the overall market, CUMMINS INC's return on equity exceeds that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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