Today, Cintas Corp (CTAS, Financial) experienced a slight decrease in its stock price by 1.86%, yet it has shown a gain of 7.99% over the past three months. With an Earnings Per Share (EPS) of 14.48, investors might wonder if the stock is currently overvalued. This analysis delves into the valuation of Cintas, encouraging readers to explore whether its market price justifies its business performance and earnings.
Company Overview
Cintas Corp (CTAS, Financial) is renowned for its comprehensive range of services and products, including uniform rentals and sales, and various facility services. The company primarily operates through its uniform and facility services unit, which is a significant contributor to its revenue. Cintas's offerings extend beyond just uniforms; they include entrance mats, mops, shop towels, hand sanitizers, and restroom supplies, alongside first aid and safety services, fire protection services, and uniform direct sales. With a current stock price of $683.11 and a market capitalization of $69.30 billion, a comparison with the GF Value, which is pegged at $537.61, suggests that the stock might be modestly overvalued.
Understanding GF Value
The GF Value is a unique valuation metric used to estimate the intrinsic value of a stock. It incorporates historical trading multiples such as PE, PS, PB ratios, and Price-to-Free-Cash-Flow, alongside a GuruFocus adjustment factor based on the company's past returns and growth, and projected future business performance. According to the GF Value, the fair value of Cintas stands at $537.61, indicating that the stock is currently trading above its intrinsic value. This discrepancy suggests that Cintas might offer lower future returns compared to its business growth.
Financial Strength and Stability
Investing in companies with robust financial health is crucial to mitigate the risk of capital loss. Cintas's financial strength is commendable, with a cash-to-debt ratio of 0.05, although this is lower than many of its peers in the Business Services industry. The company's financial strength has been rated 7 out of 10 by GuruFocus, indicating a stable financial condition.
Profitability and Growth Prospects
Cintas has maintained profitability over the past decade, with an impressive operating margin of 21.17%, ranking it higher than 87.33% of its industry peers. The company's 3-year average annual revenue growth rate stands at 8.8%, reflecting a strong potential for future value creation for shareholders.
Comparing the Return on Invested Capital (ROIC) of 20.64 to the Weighted Average Cost of Capital (WACC) of 10.3 further underscores Cintas's effective capital management, as it is generating higher returns on investment than the cost of its capital.
Conclusion
While Cintas (CTAS, Financial) appears modestly overvalued based on its current market price and GF Value, its financial health and profitability metrics indicate a strong business model. For investors interested in further details about Cintas's financial performance, the 30-Year Financials provide a comprehensive overview.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
