In this video from the Market Foolery show, Chris Hill, Taylor Muckerman, and Jason Moser take a closer look at Cummins (NYSE:CMI) after getting a question from a loyal listener. The company manufactures engines, generators, and filtration systems. After a year of cutting costs and increasing efficiency, its share price has soared. But right now, it's looking a bit overvalued, and its operating markets are fairly soft.

A full transcript follows the video.

This podcast was recorded on Jan. 30, 2017.

Chris Hill: Todd Whitcomb in Utah, "I am attempting to value Cummins Incorporated and I was curious to get your expert opinion. Thanks. Love the Show."

Taylor, Cummins for those unfamiliar, this is a heavy equipment maker. Engines, power generation, turbo technologies, big stuff.

Taylor Muckerman: Yeah, we're talking 15 liter, 12 liter engines. A company that has had a good run. We talked right before the show. It is up about 60% over the last year. That makes me wonder if the valuation might be a little to rich. If you look at some of the metrics that it is trading at, like a price to earnings, just north 21 times. The five year average has been right around 15. The price to book, not as bad, right around 3.5 times. Price to book historically over the last five years around 3.2.

You are looking at a lot of these areas where this company does business: mining . . . its mining business is down about 45% from its all-time high. Its marine business is down about 40%. Oil and gas is still down 80%. There is some upside there, but they're not expecting the bottom to flatten until at least the middle of 2017, maybe even later into the year. You might be able to get a better price, especially because we have seen this run up, when results really haven't caught up to that share price performance.

Hill: I was going to say, that's surprising to hear you tic off the various percentages of how their business units have fallen. I can see a six . . . I mean this is a $25 billion company. I could see a 60% run up like that if they were flat out crushing it.

Muckerman: They're not.

Hill: They're not.

Muckerman: In the U.S., revenues are still falling. They are looking at China to be a stronger segment, because obviously heavy machinery companies, you're not going to succeed on a global basis unless China is helping you out. So they do have a favorable outlook for China, more near-term than North America. The balance sheet is there, they have some time to wait it out, maybe some M&A on the technology side. If not, you could certainly see some share buybacks or an increase in the dividend as a likely possibility. There is some upside there, in term of where it is at now, I don't have a price target or anything like that. It does appear a little richly valued based on the last five years worth of multiples.

Hill: So this is one of those companies we get questions about from time to time and the name pops up, in part because it is one of those spaces that I think certainly over the last few years when you think of Caterpillar and sort of the ups and downs that Caterpillar has gone through. This type of industry becomes more interesting to watch. It is not the sexiest industry in the world.

Muckerman: Right.

Hill: But it becomes more interesting.

Muckerman: One thing that you will look at with these cyclical industries that rely on oil and gas and commodities. If the price to earnings, or the pork value is a little high, maybe it is because earnings have been depressed, so it might be toward the bottom of the cycle. You always want to look a little deeper than just these multiples. If you look at enterprise value to revenue, the spread between its five year average and where it is at right now isn't necessarily as high those other two that I mentioned. You really want to dive in a little bit closer, because earnings could be depressed based on cyclicality.

Hill: So I looked up the origins of this company. Started by a man named Clessie Lyle Cummins. Clessie, there is a name that I've never heard in my life before.

Muckerman: Bring it back.

Hill: Grew up in rural Indiana. Never had formal education past the eighth grade. Is just one of those people that just makes you shake your head in wonder at what he is able to do once he starts working and innovating. He was awarded 33 patents for his various inventions. Set five world records for endurance and speed for trucks, buses and race cars. Really amazing.

I love stories like that. There are the people that are highly educated and do amazing things, and there are people who have the brains, don't get the formal education and do them anyway.

Muckerman: Roll their sleeves up and get it done.

Jason Moser: Yeah, and you hear about that stuff and you think about financial implications there and how much money ends up making and yada, yada, yada. It is natural to think about, wow, it would be so great to make all of that kind of money. Those are the people that just do it, because they love it. That is just what they love doing. For them, the money is like one of those things that just comes from building really great products and ideas.

Muckerman: Really fast cars apparently.

Hill: Yeah.

Muckerman: Or trucks and buses.

Hill: Thanks for being here guys.

Chris Hill has no position in any stocks mentioned. Jason Moser has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Cummins. The Motley Fool has a disclosure policy.