Today, we delve into the financial standing of Cintas Corp (CTAS, Financial), a leading provider of business services. Despite a daily loss of -3.45%, the company has seen a 3-month gain of 0.85%. The company's Earnings Per Share (EPS) stand at 12.98. But how does this translate into the company's intrinsic value? Is Cintas (CTAS) fairly valued? This article aims to answer these questions and provide a comprehensive valuation analysis of Cintas (CTAS).
A Brief Overview of Cintas Corp (CTAS, Financial)
Cintas Corp (CTAS) operates as a one-stop-shop that rents and sells uniforms and ancillary products and services, such as mops, first aid kits, and fire inspections. It offers a wide range of items, from office attire and custom-tailored apparel to flame-resistant clothing and lab coats. Cintas also provides rental and sale of entrance mats, mops, shop towels, hand sanitizers, and restroom supplies. The company's remaining business includes a first aid and safety services business, a fire protection services business, and a uniform direct sales business.
With a current share price of $488.07 and a market cap of $50 billion, our analysis suggests that Cintas stock is fairly valued. But what does this mean for potential investors? Let's dive deeper into the company's GF Value, financial strength, profitability, and growth prospects to find out.
Understanding the GF Value of Cintas (CTAS, Financial)
The GF Value is our unique estimation of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the ideal fair trading value of the stock.
According to our analysis, Cintas (CTAS, Financial) is fairly valued. The stock's current price of $488.07 per share and the market cap of $50 billion align with our GF Value estimate. This suggests that the long-term return of Cintas (CTAS) stock is likely to be close to the rate of its business growth.
Assessing the Financial Strength of Cintas (CTAS, Financial)
Investing in companies with low financial strength can result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Cintas has a cash-to-debt ratio of 0.05, ranking worse than 90.49% of 1051 companies in the Business Services industry. Based on this, we rank Cintas's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth of Cintas (CTAS, Financial)
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. Cintas has been profitable for 10 years over the past 10 years. In the past 12 months, the company had revenues of $8.80 billion and Earnings Per Share (EPS) of $12.98. Its operating margin of 20.45% is better than 84.87% of 1064 companies in the Business Services industry. Overall, we rank Cintas's profitability as strong.
Growth is one of the most important factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Cintas is 8.8%, ranking better than 63.54% of 982 companies in the Business Services industry. The 3-year average EBITDA growth is 14.1%, ranking better than 58.52% of 851 companies in the Business Services industry.
Evaluating Cintas (CTAS, Financial)'s ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. In the past 12 months, Cintas's ROIC was 19.25 while its WACC came in at 10.26.
Conclusion
In conclusion, the stock of Cintas (CTAS, Financial) is believed to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 58.52% of 851 companies in the Business Services industry. To learn more about Cintas stock, you can check out its 30-Year Financials here.
To find out high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
