Cintas currently trades at $200.50 per share and has shown little upside over the past six months, posting a middling return of 4.1%.
Given the underwhelming price action, is now a good time to buy CTAS? Or should investors expect a bumpy road ahead? Find out in our full research report, it’s free.
Why Is CTAS a Good Business?
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. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Cintas’s 9.6% annualized revenue growth over the last five years was impressive. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
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 16.4% over the last five years.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Cintas’s five-year average ROIC was 26.6%, placing it among the best business services companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons why we think Cintas is a great business. At $200.50 per share (or 37.3× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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