CMI - Atmus Filtration Technologies: Underwhelming Proposition And Overvalued

2024-04-09 18:24:47 ET

Summary

• Atmus’ growth is slowing as the business faces a combination of short-term economic pressures alongside the long-term threats to its business model from the clean energy transition.
• The company has strong margins and FCFs, allowing it to reinvest in its current operations to reinvigorate growth, and eventually return to shareholders.
• We are currently uncertain about Atmus’ long-term trajectory, although suspect the coming 5 years will involve minimum financial progress.
• Atmus is trading at a premium to its peers despite the business model and growth concerns, implying the stock is overvalued.

Introduction and thesis

Atmus Filtration Technologies ( ATMU ) is a leading player in the filtration industry, specializing in the design, manufacturing, and distribution of innovative filtration solutions. The company has established itself as a key player in providing sustainable and high-performance filtration systems across various sectors.

Atmus is a spin-off from Cummins ( CMI ), which continues to hold a majority position in the company but is seeking to dispose of its entire holding....

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