Cintas Corporation (CTAS) provides corporate identity uniforms and related business services primarily in the United States, Canada, and Latin America. It operates through Uniform Rental and Facility Services; First Aid and Safety Services; and All Other segments.

The stock has gained 2% over the past year and 11.6% over the past month to close its last trading session at $399.99. The company beat the earnings estimates for the fourth quarter of fiscal 2022 and provided impressive forecasts for fiscal 2023. Its EPS came in at $2.81, surpassing the consensus estimate of $2.67.

Mr. Schneider, CEO of CTAS, said, "We achieved significant accomplishments this fiscal year despite significant inflation, including delivering upon our stated financial goals of mid- to high-single-digit organic revenue growth rates, incremental operating margins in the range of 20% to 30%, double-digit EPS growth, and the allocation of capital to improve shareholder returns.”

Here is what could shape CTAS’ performance in the near term:

Robust Financials

CTAS’ total revenue increased 11.1% year-over-year to $1.63 billion for the fourth quarter ended May 31, 2022. Its operating income grew 13.5% from its year-ago value to $404.44 million. Its net income amounted to $294.46 million, up 10% from its prior-year quarter. The company’s EPS rose 13.8% year-over-year to $2.81.

Strong Profitability

CTAS’ trailing-12-month net income margin of 15.73% is 134.6% higher than the industry average of 6.71%. In addition, its trailing-12-month gross profit margin of 46.24% is 56.3% higher than the 29.59% industry average. Also, its trailing-12-month ROE, ROC, and ROA are 146%, 123.9%, and 193.7% higher than the respective industry averages.

Impressive Growth Prospects

Street expects CTAS’ revenues to rise 8.4% in the current year and 6.5% next year. The EPS is expected to rise 0.3% In the current quarter, 5.8% in the current year, and 10.8% next year.

In addition, CTAS’ EPS is expected to rise at an 11.1% CAGR over the next five years. Furthermore, the company has an impressive earnings surprise history; it topped the consensus EPS estimates in each of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Out of the nine Wall Street analysts that rated CTAS, six rated it Buy, and three rated it hold. The 12-month median price target of $429.67 indicates a 7.4% potential upside. The price targets range from a low of $362.00 to a high of $471.00.

POWR Ratings Reflect Solid Prospects

CTAS has an overall B grade, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CTAS has an A grade for Quality. CTAS’ higher-than-industry profitability is consistent with its Quality grade.

Among the 43 stocks in the B-rated Outsourcing - Business Services industry, CTAS is ranked #13.

Beyond what I stated above, we have graded CTAS for Growth, Value, Sentiment, Stability, and Momentum. Get all CTAS ratings here.

Bottom Line

Despite facing various macroeconomic headwinds, the company achieved robust revenue and earnings growth in the last reported quarter. So, given the stock’s higher-than-industry profitability and solid growth attributes, we think it could be an opportune time for investors to scoop up its shares.

How does Cintas Corporation (CTAS) Stack Up Against its Peers?

CTAS has an overall POWR Rating of B, which equates to a Buy. Check out these other stocks within the Outsourcing - Business Services industry with A (Strong Buy) ratings: Civeo Corp. (CVEO), ARC Document Solutions, Inc. (ARC), and Insperity, Inc. (NSP).

CTAS shares were trading at $395.55 per share on Friday afternoon, down $4.44 (-1.11%). Year-to-date, CTAS has declined -10.29%, versus a -16.47% rise in the benchmark S&P 500 index during the same period.

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.

More...