Cummins vs Generac Which Is More Attractive?

Cummins and Generac are two leading companies in the power generation industry, known for their reliable and efficient products. Both companies have established themselves as key players in the market, with Cummins focusing on a wide range of power solutions for various industries, while Generac specializes in residential and commercial backup power systems. Investors often compare Cummins and Generac stocks to assess their growth potential and financial performance, making it crucial to understand the differences between the two companies for informed investment decisions.

Cummins or Generac?

When comparing Cummins and Generac, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Cummins and Generac.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Cummins has a dividend yield of 1.91%, while Generac has a dividend yield of -%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Cummins reports a 5-year dividend growth of 7.92% year and a payout ratio of 45.64%. On the other hand, Generac reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Cummins P/E ratio at 23.67 and Generac's P/E ratio at 39.49. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Cummins P/B ratio is 4.81 while Generac's P/B ratio is 4.84.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Cummins has seen a 5-year revenue growth of 0.64%, while Generac's is 1.00%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Cummins's ROE at 22.20% and Generac's ROE at 12.44%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $357.15 for Cummins and $188.79 for Generac. Over the past year, Cummins's prices ranged from $216.92 to $370.21, with a yearly change of 70.67%. Generac's prices fluctuated between $102.23 and $195.94, with a yearly change of 91.67%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.