Over the last six months, Cintas’s shares have sunk to $188.41, producing a disappointing 9.5% loss - a stark contrast to the S&P 500’s 24.4% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for CTAS? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On CTAS?
Starting as a family business collecting and cleaning shop rags in Cincinnati, Cintas (NASDAQ: CTAS) provides corporate identity uniforms, facility services, and safety products to over one million businesses across North America.
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Cintas grew its sales at a solid 8.5% compounded annual growth rate. Its growth beat the average business services company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Cintas’s EPS grew at an astounding 15.9% compounded annual growth rate over the last five years, higher than its 8.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Cintas has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 16.2% over the last five years.
Final Judgment
These are just a few reasons why we think Cintas is a high-quality business. After the recent drawdown, the stock trades at 38× forward P/E (or $188.41 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More Than Cintas
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