CTAS – Market expectations for Uniform ROA to expand to record highs, but management may have concerns about margins and operations

February 25, 2022

  • Cintas Corporation (CTAS) currently trades above corporate and near historical averages relative to Uniform earnings, with a 30.0x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to record highs of 35%, accompanied by 5% Uniform asset growth.

  • Meanwhile, analysts expect Uniform ROA to maintain 27%-28% levels through 2023, accompanied by 2% Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $241, representing approximately 36% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about margins and operations.

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