Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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- Common-Size Income Statement
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
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Long-term Activity Ratios (Summary)
Cummins Inc., long-term (investment) activity ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Net fixed asset turnover | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset) | ||||||
| Total asset turnover | ||||||
| Equity turnover |
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).
- Net Fixed Asset Turnover
- The net fixed asset turnover ratio experienced a decline from 5.55 in 2019 to 4.66 in 2020, indicating reduced efficiency in utilizing fixed assets to generate sales amid the challenging environment of that year. However, recovery was observed in subsequent years, rising to 5.43 in 2021, followed by a slight dip to 5.08 in 2022, and a rebound to 5.45 in 2023. Overall, the ratio demonstrates resilience with a generally upward trend after the initial decline.
- Net Fixed Asset Turnover (Including Operating Lease, Right-of-Use Asset)
- This adjusted measure follows a similar pattern to the standard net fixed asset turnover. Starting at 4.97 in 2019, it decreased to 4.22 in 2020, reflecting the same operational challenges. A steady recovery ensued, with the ratio increasing to 4.94 in 2021 and 4.67 in 2022 before improving further to 5.05 in 2023. This indicates consistent improvement in asset utilization when incorporating right-of-use assets, aligning closely with the traditional fixed asset turnover trend.
- Total Asset Turnover
- The total asset turnover ratio showed a significant drop from 1.19 in 2019 to 0.88 in 2020, highlighting a substantial decrease in the effectiveness of overall asset use in generating revenue during that period. The ratio partially recovered to 1.01 in 2021, declined again to 0.93 in 2022, and improved to 1.06 in 2023. Despite some volatility, a gradual recovery toward pre-2020 levels is observed, suggesting improved operational efficiency with total assets.
- Equity Turnover
- The equity turnover ratio declined from 3.14 in 2019 to 2.46 in 2020, indicating lower sales generation relative to equity during the downturn. The ratio then ascended steadily to 2.83 in 2021 and 3.13 in 2022, surpassing the prior low points, and further increased markedly to 3.85 in 2023. This upward trend reflects enhanced effectiveness in utilizing shareholders’ equity to generate revenue over the analyzed period.
Net Fixed Asset Turnover
Cummins Inc., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | ||||||
| Property, plant and equipment, net | ||||||
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | ||||||
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | ||||||
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | ||||||
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 2023 Calculation
Net fixed asset turnover = Net sales ÷ Property, plant and equipment, net
= ÷ =
2 Click competitor name to see calculations.
- Net Sales
- The net sales exhibit a fluctuating trend initially, with a decline from 23,571 million USD in 2019 to 19,811 million USD in 2020, reflecting a decrease possibly due to external challenges during that period. Subsequently, there is a consistent and significant upward trend from 2020 onwards, increasing to 24,021 million USD in 2021, 28,074 million USD in 2022, and further to 34,065 million USD in 2023. This indicates a strong recovery and growth in revenue over the last three years.
- Property, Plant and Equipment, Net
- The net value of property, plant, and equipment remained relatively stable from 2019 to 2021, with a slight increase from 4,245 million USD to 4,422 million USD. However, from 2021 onwards, the asset base expanded considerably, reaching 5,521 million USD in 2022 and 6,249 million USD in 2023. This suggests ongoing investments in fixed assets, reflecting capacity expansion or modernization efforts.
- Net Fixed Asset Turnover
- The ratio shows a decline from 5.55 in 2019 to 4.66 in 2020, indicating reduced efficiency in utilizing fixed assets to generate sales during that period. This aligns with the decrease in sales seen in 2020. In 2021, the ratio recovers to 5.43, demonstrating improved asset utilization. Although there is a slight dip to 5.08 in 2022, the ratio rises again to 5.45 in 2023, suggesting a generally strong and improving ability to generate revenue from fixed assets despite the increase in asset base.
Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Cummins Inc., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | ||||||
| Property, plant and equipment, net | ||||||
| Operating lease assets | ||||||
| Property, plant and equipment, net (including operating lease, right-of-use asset) | ||||||
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | ||||||
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | ||||||
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 2023 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Net sales ÷ Property, plant and equipment, net (including operating lease, right-of-use asset)
= ÷ =
2 Click competitor name to see calculations.
- Net Sales
- Net sales exhibit a notable upward trend over the five-year period. After a decline from 23,571 million USD in 2019 to 19,811 million USD in 2020, net sales rebounded significantly to 24,021 million USD in 2021. This positive momentum continued with increases to 28,074 million USD in 2022 and further to 34,065 million USD in 2023, reflecting a strong recovery and growth trajectory.
- Property, Plant and Equipment, Net (Including Operating Lease, Right-of-Use Asset)
- The net value of property, plant, and equipment remained relatively stable between 2019 and 2021, with minor fluctuations from 4,741 million USD in 2019 to 4,866 million USD in 2021. However, the period from 2021 onwards shows a marked increase, rising to 6,013 million USD in 2022 and further to 6,750 million USD in 2023. This increase is indicative of capital investment or asset acquisitions in recent years.
- Net Fixed Asset Turnover (Including Operating Lease, Right-of-Use Asset)
- The net fixed asset turnover ratio exhibits variability throughout the period. It declines from 4.97 in 2019 to 4.22 in 2020, suggesting reduced efficiency in generating sales from fixed assets during that year. In 2021, the ratio improved back to 4.94, followed by a slight dip to 4.67 in 2022. The ratio then increases to 5.05 in 2023, the highest in the period. This pattern reflects fluctuations in operational efficiency, with the most recent figures indicating enhanced utilization of fixed assets to generate sales.
Total Asset Turnover
Cummins Inc., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | ||||||
| Total assets | ||||||
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | ||||||
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Total Asset Turnover, Sector | ||||||
| Capital Goods | ||||||
| Total Asset Turnover, Industry | ||||||
| Industrials | ||||||
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 2023 Calculation
Total asset turnover = Net sales ÷ Total assets
= ÷ =
2 Click competitor name to see calculations.
- Net Sales Trend
- Net sales demonstrated a decline from 23,571 million USD in 2019 to 19,811 million USD in 2020, reflecting a notable contraction. However, the subsequent years showed a recovery and positive growth trend, with sales increasing to 24,021 million USD in 2021, 28,074 million USD in 2022, and further to 34,065 million USD in 2023. This indicates a steady upward momentum in revenue generation post-2020.
- Total Assets Trend
- Total assets increased consistently over the five-year period, rising from 19,737 million USD at the end of 2019 to 32,005 million USD by the end of 2023. The most significant growth occurred between 2021 and 2022, with total assets expanding from 23,710 million USD to 30,299 million USD, suggesting investment and asset accumulation activities intensified during this period.
- Total Asset Turnover Ratio Trend
- The total asset turnover ratio, which measures efficiency in using assets to generate sales, declined sharply from 1.19 in 2019 to 0.88 in 2020. Subsequently, it showed a partial recovery, increasing to 1.01 in 2021, then falling slightly to 0.93 in 2022 before improving again to 1.06 in 2023. Despite fluctuations, the ratio did not return to the initial 2019 level by 2023, indicating that although asset utilization improved after 2020, it remained below the initial efficiency benchmark.
- Observations and Insights
- The data reveals a challenging year in 2020, likely due to external factors impacting sales and asset efficiency. The recovery in net sales from 2021 onwards suggests effective measures to regain market position and growth. The continuous increase in total assets indicates capital expansion and investment efforts, although the slower recovery of the asset turnover ratio implies that asset utilization was less efficient during the period of growth. Overall, the trends point to a strategic focus on growth and asset base expansion, accompanied by gradual improvements in operational efficiency.
Equity Turnover
Cummins Inc., equity turnover calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | ||||||
| Total Cummins Inc. shareholders’ equity | ||||||
| Long-term Activity Ratio | ||||||
| Equity turnover1 | ||||||
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Equity Turnover, Sector | ||||||
| Capital Goods | ||||||
| Equity Turnover, Industry | ||||||
| Industrials | ||||||
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 2023 Calculation
Equity turnover = Net sales ÷ Total Cummins Inc. shareholders’ equity
= ÷ =
2 Click competitor name to see calculations.
- Net Sales
- Net sales show a fluctuating yet overall increasing trend over the five-year period. Starting at 23,571 million US dollars in 2019, there was a notable decline to 19,811 million in 2020. Subsequently, net sales rose to 24,021 million in 2021, continued to increase to 28,074 million in 2022, and reached a peak of 34,065 million in 2023. This indicates a strong recovery and growth trajectory after the dip in 2020.
- Total Shareholders’ Equity
- Total shareholders’ equity generally increased from 7,507 million US dollars in 2019 to 8,975 million in 2022, depicting steady growth in the company’s net assets. However, in 2023 there was a slight decline to 8,850 million, suggesting a marginal decrease in equity after several years of consistent expansion.
- Equity Turnover Ratio
- The equity turnover ratio demonstrates varying efficiency in the use of shareholders’ equity to generate sales. The ratio declined from 3.14 in 2019 to 2.46 in 2020, coinciding with the dip in net sales. Thereafter, the ratio improved to 2.83 in 2021 and nearly returned to the 2019 level at 3.13 in 2022. Notably, in 2023 the equity turnover ratio increased significantly to 3.85, indicating enhanced effectiveness in utilizing equity to drive revenue growth during that year.