Cintas (CTAS) is a High Quality Stock With High Certainty & Consistency

Stock (Symbol)

Cintas (CTAS)

Stock Price

$580

Sector

Data is as of

Expected to Report

Company Description

The Company helps businesses of all types and sizes, primarily in the United States, as well as Canada and Latin America.

Its segments include Uniform Rental and Facility Services, and First Aid and Safety Services.

Uniform Rental and Facility Services segment consists of the rental and servicing of uniforms and other garments, including flame-resistant clothing, mats, mops and shop towels and other ancillary items. In addition to these rental items, restroom cleaning services and supplies and the sale of items from its catalogues to its customers on route are included within this segment.

First Aid and Safety Services segment consists of first aid and safety products and services.

The remainder of its segments, which consists of the Fire Protection Services segment and the Uniform Direct Sale segment, is included in All Other.

It provides its products and services to small service and manufacturing companies to corporations. Source: Refinitiv

Sharek’s Take

Cintas is the largest uniform supplier in North America, but the company offers so much more to small, medium, and large businesses. Cintas has a great system which is to provide each worker uniforms for two weeks, with one set being used by the employee and the other being laundered. Once a week a Cintas rep comes to the facility, drops off clean uniforms and picks up dirty ones. Companies have no up-front investment, as Cintas funds the program setup. In addition to uniforms, Cintas provides floor care, restroom supplies, first aid and safety products, fire extinguishers, and safety compliance training. During COVID-19 the company was a big provider of sanitizers and other PPE products. Here are some fun facts about Cintas:

• Cintas was founded in 1968 when Richard T Farmer left his family laundry business to launch a uniform business using an exclusive new fabric.
• In the early 1970s, Cintas acquired the family laundry business, and since then has developed new products and services to compliment the existing business.
• As of May 2023, the company had 11,500 local delivery routes, 463 facilities, and 12 distribution centers.
• Its customer base has been 70% services industries such as hospitality, healthcare, and food service with 30% in goods producing industries such as manufacturing and construction.

Cintas is made up of the following business segments:

• Uniform Rental and Facility Services: 78% of revenue last qtr, +8% growth year-over-year.
  • This segment includes the rental and cleaning of uniforms, including flame-resistant clothing.
  • The company’s walk-off mats are something you’ve probably traveled past today and might come weekly with new mops.
  • Restroom cleaning services and supplies are also included in this division.
• First Aid & Safety Services: 11% of revenue, +13% growth.
  • This segment includes first aid products, fire extinguishers and alarms, safety products, and personal protective equipment (PPE).
  • On the healthcare side, Cintas offers hygiene supplies, including dental equipment.
• Other: 11% of revenue, +22% growth.
  • This segment includes Fire Protection Services and Uniform Direct Sales.
  • Uniform Direct Sales organic revenue was down 3%. While the Fire business’ organic revenue was up 14%.

Cintas is a high-quality Blue Chip stock with a dividend, a stock buyback program, and a history of growing profits at a double-digit rate. Revenue and profits (EPS) have increased in 50 of the past 52 years, including 39 consecutive years before the Great Recession (2000). Some of the growth comes from acquisitions of other uniform companies. Analysts gave the stock an Estimated Long-Term Growth Rate of 12%. The stock also yields around 1%. CTAS has raised the dividend ever year since going public, with dividend increases since 1983. CTAS is on the radar for the Conservative Growth Portfolio. With a P/E of 40, the stock seems to be overvalued at this time.

One Year Chart

This stock was pushing higher in 2023 even though there was no fundamental change to the company’s business. This stock went up too much last year.

The P/E ratio of 40 also seems high. 

Est. LTG of 12% is where it should be.

Qtrly profit growth bounced back to 16% last quarter.

Earnings Table

Revenue growth was driven by new customer acquisitions, successful upselling to the existing clients, and strategic focus on key sectors like healthcare. Opening clean room facilities in North Carolina and Wisconsin expanded CTAS uniform rentals and facility service in pharmaceuticals and biotechnology, contributing to revenue growth last quarter. 

Annual Profit Estimates are up this qtr. Note CTAS has a Fiscal Year ending on May 31st.

Qtrly Profit Estimates are for 14%, 11%, 10%, and 11% profit growth in the next 4 qtrs. Analysts predict Cintas’ revenue will grow 9% this quarter.

Fair Value

Before, CTAS often had a P/E ratio around high-20s. Now it’s at 40. That’s kind of expensive.

My Fair ue is a P/E of 35. I think the stock is overvalued right now.

Also, the company used to pay dividends once per year. In October 2020, the Board of Directors changed the dividend policy to quarterly.

Bottom Line

Cintas (CTAS) has been a great stock the past decade, but that hasn’t always been the case. When I look back to the stock since its IPO I see it went public at $1 in 1983, and was in an uptrend until 1998, then went sideways from 1999-2007, declined during the Financial Crisis of 2008/2009, and has been in an uptrend since.

Cintas continues to deliver 12%-or-so profit growth. I love this company and want to buy the stock but there’s not much upside at this time.

CTAS is on the radar for the Conservative Growth Portfolio.

Power Rankings

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Aggressive Growth Portfolio

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Conservative Stock Portfolio

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