3 Reasons We Love Cintas (CTAS)

Over the last six months, Cintas’s shares have sunk to $186.45, producing a disappointing 13.4% loss - a stark contrast to the S&P 500’s 11.5% gain. This may have investors wondering how to approach the situation.

Given the weaker price action, is now a good time to buy CTAS? Find out in our full research report, it’s free for active Edge members.

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 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. Thankfully, Cintas’s 9.3% annualized revenue growth over the last five years was impressive. Its growth beat the average business services company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Cintas’s EPS grew at an astounding 15.6% compounded annual growth rate over the last five years, higher than its 9.3% 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 Cintas is a high-quality business worth owning. After the recent drawdown, the stock trades at 36.4× forward P/E (or $186.45 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

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