Cintas Corp. ($CTAS): Earnings Analysis

Updated on

Cintas Corp. ($CTAS): Earnings Analysis

Cintas Corp. reports preliminary financial results for the quarter ended 2012-08-31.

Cintas Corp. (CTAS) recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please visit

Cintas Corp.’s analysis versus peers uses the following peer-set: Rentokil Initial PLC (RTO-GB), Berendsen PLC (BRSN), Healthcare Services Group Inc. (HCSG), UniFirst Corp. (UNF), ABM Industries Inc. (ABM) and G&K Services Inc. Cl A (GKSR). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million) 2012-08-31 2012-05-31 2012-02-29 2011-11-30 2011-08-31
Revenues 1,051.3 1,053.6 1,012.1 1,019.1 1,017.2
Revenue Growth % (0.2) 4.1 (0.7) 0.2 0.5
Net Income 76.7 77.8 76.0 74.4 68.6
Net Income Growth % (1.4) 2.4 2.3 8.3 (3.0)
Net Margin % 7.3 7.4 7.5 7.3 6.7
ROE % (Annualized) 14.3 14.4 14.1 14.1 12.4
ROA % (Annualized) 7.4 7.4 7.2 7.1 6.5

Valuation Drivers

Cintas Corp.’s current Price/Book of 2.4 is about median in its peer group. The market expects CTAS-US to grow at about the same rate as its chosen peers (PE of 16.9 compared to peer median of 18.1) and to maintain the peer median return (ROE of 14.3%) it currently generates.

The company attempts to achieve high profit margins (currently 7.4% vs. peer median of 4.1%) through differentiated products. It currently operates with peer median asset turns of 1.0x. CTAS-US’s net margin continues to trend upward and is above (but within one standard deviation of) its four-year average net margin of 6.9%.

Economic Moat

Changes in the company’s revenues are in-line with its peers (annual revenue changed by 7.7%) but its earnings performance has been better — its annual earnings changed by 19.7% compared to the peer median of 7.6%, implying that it has better cost control relative to its peers. CTAS-US currently converts every 1% of change in revenue into 2.6% of change in annual reported earnings.

CTAS-US’s return on assets is above its peer median both in the current period (7.4% vs. peer median 4.5%) and also over the past five years (6.7% vs. peer median 4.1%). This performance suggests that the company’s relatively high operating returns are sustainable.

The company’s comparatively healthy gross margin of 46.2% versus peer median of 36.3% suggests that it has a differentiated strategy with pricing advantages. Further, CTAS-US’s bottom-line operating performance is better than peer median (pre-tax margins of 11.7% compared to peer median 6.3%) suggesting relatively tight control on operating costs.

Growth & Investment Strategy

CTAS-US’s revenues have grown at about the same rate as its peers (2.8% vs. 2.8% respectively for the past three years). Similarly, the stock price implies median long-term growth as its PE ratio is around the peer median of 16.9. The historical performance and long-term growth expectations for the company are largely in sync.

CTAS-US’s annualized rate of change in capital of 2.8% over the past three years is around its peer median of 2.6%. This median investment has likewise generated a peer median return on capital of 7.4% averaged over the same three years. This median return on investment implies that the company is investing appropriately.

Earnings Quality

CTAS-US has reported relatively strong net income margin for the last twelve months (7.4% vs. peer median of 4.1%). This strong margin performance was accompanied by a level of accruals that was around peer median (4.9% vs. peer median of 4.9%) suggesting that the reported net income is supported by a reasonable level of accruals.

CTAS-US’s accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Graph of Revenues Trend for Cintas Corp. (CTAS)
Graph of Revenues Trend for Cintas Corp. (CTAS)

Company Profile

Cintas Corp. designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, tile and carpet cleaning, promotional products, first aid and safety products, fire protection services and document management services customers throughout U.S. and Canada. The company operates through four operating segments: Rental Uniforms and Ancillary Products, Uniform Direct Sales, First Aid, Safety and Fire Protection and Document Management Services. The Rental Uniforms and Ancillary Products operating 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. This segment also provides rental items, restroom cleaning services and supplies and carpet and tile cleaning services. The Uniform Direct Sales operating segment consists of the direct sale of uniforms and related items and branded promotional products. The First Aid, Safety and Fire Protection Services operating segment consists of first aid, safety and fire protection products and services. The Document Management Services operating segment consists of document destruction, document imaging and document retention services. Cintas was founded by Richard T. Farmer in 1968 and is headquartered in Cincinnati, OH.


The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party’s use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you’re agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website

Leave a Comment