Search Results for: CTAS

Company Profile (excerpt from Reuters): Cintas Corporation, incorporated on November 13, 1986, is a provider of corporate identity uniforms through rental and sales programs, as well as a provider of related business services, including entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services, first aid and safety services and fire protection products and services. The Company’s segments include uniform rental and facility services, and first aid and safety services. Rental processing plants, rental branches, first aid and safety facilities, fire protection facilities, direct sales offices, distribution centers and manufacturing facilities are all utilized by the businesses included in All Other.

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTAS – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Stage 2: Determination of Intrinsic Value

Cintas Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.94 in 2015 to an estimated $6.44 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.34% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cintas Corporation revealed the company was trading above its Graham Number of $68.91. The company pays a dividend of $1.62 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 29.17, which was below the industry average of 29.23, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.68.

Cintas Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Useful Links:

Most Recent Balance Sheet Figures

Earnings Per Share History

Earnings Per Share – ModernGraham History

Recommended Reading:

Other ModernGraham posts about the company

Other ModernGraham posts about related companies

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Company Profile (excerpt from Reuters): Cintas Corporation, incorporated on November 13, 1986, is a provider of corporate identity uniforms through rental and sales programs, as well as a provider of related business services, including entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services, first aid and safety services and fire protection products and services. The Company’s segments include uniform rental and facility services, and first aid and safety services. Rental processing plants, rental branches, first aid and safety facilities, fire protection facilities, direct sales offices, distribution centers and manufacturing facilities are all utilized by the businesses included in All Other.

CTAS data by YCharts

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTAS – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Stage 2: Determination of Intrinsic Value

Cintas Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.46 in 2014 to an estimated $5.53 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Cintas Corporation revealed the company was trading above its Graham Number of $59.9. The company pays a dividend of $1.33 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 30.84, which was below the industry average of 32.93, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-18.65.

Cintas Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Useful Links:

Most Recent Balance Sheet Figures

Earnings Per Share History

Earnings Per Share – ModernGraham History

Recommended Reading:

Other ModernGraham posts about the company

Other ModernGraham posts about related companies

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Cintas Corporation (CTAS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cintas Corporation (Cintas) provides products and services to businesses of all types. The Company operates in North America, as well as Latin America, Europe and Asia. Cintas operates in four segments: The Rental Uniforms and Ancillary Products segment consists of rental of corporate identify uniforms and other garments, including flame resistant clothing, and the rental or sale of mats, mops, shop towels, restroom supplies and other rental services. The Uniform Direct Sales segment consists of the direct sale of uniforms and related items. The First Aid, Safety and Fire Protection Services segment consists of first aid, safety and fire protection products and services. The Document Management Services segment consists of document destruction, document imaging and document retention services.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
6. Moderate PEmg ratio – PEmg is less than 20 - FAIL
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - FAIL
3. Earnings Stability – positive earnings per share for at least 5 years - PASS
4. Dividend Record – currently pays a dividend - PASS
5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Balance Sheet - February 2015

Earnings Per Share

Earnings Per Share – ModernGraham

Dividend History

Conclusion:

Cintas Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios, while the Enterprising Investor is concerned with the level of debt relative to the net current assets.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.66 in 2011 to an estimated $2.91 for 2015.  This level of demonstrated growth supports the market’s implied estimate of 9.92% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cintas Corporation (CTAS)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Cintas Corporation (CTAS) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Dow Components to Research – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Cintas Corporation (CTAS) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cintas Corporation (Cintas) provides specialized products and services to businesses of all types throughout the North America, Latin America, Europe and Asia. The Company operates in three segments: Rental Uniforms and Ancillary Products, Uniform Direct Sales and First Aid, Safety and Fire Protection Services. The Rental Uniforms and Ancillary Products segment consists of the rental and servicing of uniforms and other garments including flame resistant clothing, mats, mops and shop towels. The segment also provides restroom cleaning services and supplies and carpet and tile cleaning services. The Uniform Direct Sales segment consists of the direct sale of uniforms and related items and branded promotional products. The First Aid, Safety and Fire Protection Services segment consists of first aid, safety and fire protection products and services.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
3. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend - PASS
5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Balance Sheet – September 2014

Earnings Per Share

Earnings Per Share – ModernGraham

Dividend History

Conclusion:

Cintas Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the high PEmg and PB ratios.  The Enterprising Investor, on the other hand, has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.66 in 2011 to an estimated $2.76 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 8.62% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cintas Corporation (CTAS)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Cintas Corporation (CTAS) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.