CTAS – Markets are pricing in expectations for Uniform ROA to expand, but management may have concerns about growth, demand, pricing, automation, and labor shortages

Cintas Corporation (CTAS) currently trades above corporate and historical averages relative to Uniform earnings, with a 38.8x Uniform P/E (Fwd. V/E’).

At these levels, markets are pricing in expectations for Uniform ROA to expand to record highs of 41%, accompanied by 5% Uniform asset growth.

Meanwhile, analysts expect Uniform ROA to remain stable at 25% through 2023, accompanied by 1% Uniform asset growth.

If sustained going forward, these levels would imply a stock price closer to $204, representing significant potential equity downside for the firm.

Moreover, the firm’s most recent earnings call suggests management may have concerns about growth, demand, pricing, automation, and labor shortages.