Cintas Corp (CTAS, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $485.47, Cintas Corp has witnessed a daily loss of 3.97%, marked against a three-month change of 0.74%. A thorough analysis, underlined by the GF Score, suggests that Cintas Corp is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of Cintas Corp's GF Score:
- Financial strength rank: 6/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 9/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high profitability rank and growth rank, and a slightly lower GF Value rank, GuruFocus assigned Cintas Corp the GF Score of 93 out of 100, which signals the highest outperformance potential.
Understanding Cintas Corp's Business
Cintas Corp, with a market cap of $49.72 billion and sales of $8.82 billion, is positioned as a one-stop-shop that rents/sells uniforms and ancillary products and services, such as mops, first aid kits, and fire inspections. In its core uniform and facility services unit (a majority of sales), Cintas provides uniform rental programs for items including but not limited to office attire, custom tailored apparel, flame-resistant clothing, lab coats, and other profession-specific clothing. Facilities products generally include the rental and sale of entrance mat, mops, shop towels, hand sanitizers, and restroom supplies. In addition, Cintas' remaining business includes a first aid and safety services business, a fire protection services business, and a uniform direct sales business.
Financial Strength Breakdown
According to the Financial Strength rating, Cintas Corp's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure.
The Interest Coverage ratio for Cintas Corp stands impressively at 16.21, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-Score of 10.16, Cintas Corp exhibits a strong defense against financial distress, highlighting its robust financial stability.
With a favorable Debt-to-Revenue ratio of 0.3, Cintas Corp's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Cintas Corp's impressive standing among its peers in generating profit.
Cintas Corp Operating Margin has increased (33.54%) over the past five years, as shown by the following data: 2019: 16.66; 2020: 16.41; 2021: 19.47; 2022: 20.21; 2023: 20.45; .
Furthermore, Cintas Corp's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2019: 45.39; 2020: 45.64; 2021: 46.58; 2022: 46.24; 2023: 47.34; . This trend underscores the company's growing proficiency in transforming revenue into profit.
The Piotroski F-Score confirms Cintas Corp's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency.
Cintas Corp's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Cintas Corp demonstrates a strong commitment to expanding its business.
The company's 3-Year Revenue Growth Rate is 8.8%, which outperforms better than 63.54% of 982 companies in the Business Services industry
Moreover, Cintas Corp has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 14.1, and the rate over the past five years is 12.8. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Cintas Corp's strong financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. This analysis underscores the company's robust financial health, consistent profitability, and impressive growth trajectory, making it a compelling investment opportunity.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
