Intrinsic value of Cintas Corporation - CTAS

Previous Close

$194.55

  Intrinsic Value

$74.51

stock screener

  Rating & Target

str. sell

-62%

Previous close

$194.55

 
Intrinsic value

$74.51

 
Up/down potential

-62%

 
Rating

str. sell

We calculate the intrinsic value of CTAS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 20.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
  5.96
  5.86
  5.77
  5.70
  5.63
  5.56
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
Revenue, $m
  6,930
  7,402
  7,892
  8,401
  8,932
  9,484
  10,059
  10,658
  11,282
  11,934
  12,614
  13,324
  14,065
  14,840
  15,650
  16,497
  17,383
  18,310
  19,280
  20,296
  21,361
  22,475
  23,643
  24,868
  26,151
  27,496
  28,906
  30,385
  31,936
  33,563
Variable operating expenses, $m
  5,860
  6,249
  6,654
  7,075
  7,513
  7,968
  8,443
  8,938
  9,454
  9,992
  10,415
  11,001
  11,613
  12,253
  12,921
  13,621
  14,352
  15,118
  15,919
  16,758
  17,636
  18,557
  19,521
  20,532
  21,591
  22,702
  23,866
  25,087
  26,368
  27,711
Fixed operating expenses, $m
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  55
  56
  57
  58
  59
  61
  62
  64
  65
  66
  68
  69
  71
  72
  74
  76
  77
  79
  81
Total operating expenses, $m
  5,903
  6,293
  6,699
  7,121
  7,560
  8,016
  8,492
  8,988
  9,505
  10,044
  10,468
  11,056
  11,669
  12,310
  12,979
  13,680
  14,413
  15,180
  15,983
  16,823
  17,702
  18,625
  19,590
  20,603
  21,663
  22,776
  23,942
  25,164
  26,447
  27,792
Operating income, $m
  1,027
  1,108
  1,193
  1,281
  1,372
  1,467
  1,567
  1,670
  1,778
  1,890
  2,146
  2,268
  2,397
  2,530
  2,670
  2,817
  2,970
  3,130
  3,298
  3,474
  3,658
  3,851
  4,053
  4,265
  4,487
  4,720
  4,964
  5,220
  5,489
  5,771
EBITDA, $m
  1,358
  1,452
  1,551
  1,653
  1,759
  1,869
  1,985
  2,105
  2,230
  2,360
  2,497
  2,639
  2,788
  2,943
  3,106
  3,276
  3,453
  3,639
  3,834
  4,038
  4,252
  4,476
  4,711
  4,956
  5,214
  5,485
  5,768
  6,065
  6,377
  6,704
Interest expense (income), $m
  0
  137
  152
  167
  183
  200
  217
  235
  254
  274
  294
  316
  338
  361
  386
  411
  438
  466
  495
  525
  557
  590
  625
  662
  700
  740
  783
  827
  873
  922
  972
Earnings before tax, $m
  890
  957
  1,026
  1,098
  1,172
  1,250
  1,331
  1,416
  1,504
  1,596
  1,830
  1,930
  2,035
  2,145
  2,259
  2,379
  2,504
  2,636
  2,773
  2,917
  3,068
  3,226
  3,391
  3,565
  3,747
  3,937
  4,138
  4,347
  4,568
  4,799
Tax expense, $m
  240
  258
  277
  296
  317
  338
  359
  382
  406
  431
  494
  521
  549
  579
  610
  642
  676
  712
  749
  788
  828
  871
  916
  962
  1,012
  1,063
  1,117
  1,174
  1,233
  1,296
Net income, $m
  650
  698
  749
  801
  856
  913
  972
  1,033
  1,098
  1,165
  1,336
  1,409
  1,486
  1,566
  1,649
  1,737
  1,828
  1,924
  2,024
  2,129
  2,239
  2,355
  2,476
  2,602
  2,735
  2,874
  3,020
  3,174
  3,334
  3,503

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  7,444
  7,950
  8,477
  9,024
  9,594
  10,187
  10,804
  11,448
  12,119
  12,818
  13,549
  14,311
  15,108
  15,940
  16,810
  17,719
  18,671
  19,667
  20,709
  21,801
  22,944
  24,141
  25,396
  26,711
  28,089
  29,533
  31,048
  32,637
  34,303
  36,050
Adjusted assets (=assets-cash), $m
  7,444
  7,950
  8,477
  9,024
  9,594
  10,187
  10,804
  11,448
  12,119
  12,818
  13,549
  14,311
  15,108
  15,940
  16,810
  17,719
  18,671
  19,667
  20,709
  21,801
  22,944
  24,141
  25,396
  26,711
  28,089
  29,533
  31,048
  32,637
  34,303
  36,050
Revenue / Adjusted assets
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
  0.931
Average production assets, $m
  3,257
  3,479
  3,709
  3,949
  4,198
  4,457
  4,728
  5,009
  5,303
  5,609
  5,929
  6,262
  6,611
  6,975
  7,355
  7,754
  8,170
  8,606
  9,062
  9,539
  10,040
  10,563
  11,112
  11,688
  12,291
  12,923
  13,586
  14,281
  15,010
  15,775
Working capital, $m
  1,137
  1,214
  1,294
  1,378
  1,465
  1,555
  1,650
  1,748
  1,850
  1,957
  2,069
  2,185
  2,307
  2,434
  2,567
  2,705
  2,851
  3,003
  3,162
  3,329
  3,503
  3,686
  3,878
  4,078
  4,289
  4,509
  4,741
  4,983
  5,237
  5,504
Total debt, $m
  2,807
  3,093
  3,391
  3,701
  4,024
  4,359
  4,709
  5,073
  5,453
  5,849
  6,262
  6,694
  7,145
  7,616
  8,108
  8,623
  9,161
  9,725
  10,315
  10,933
  11,580
  12,258
  12,968
  13,712
  14,492
  15,310
  16,167
  17,066
  18,009
  18,998
Total liabilities, $m
  4,213
  4,500
  4,798
  5,108
  5,430
  5,766
  6,115
  6,479
  6,859
  7,255
  7,669
  8,100
  8,551
  9,022
  9,514
  10,029
  10,568
  11,131
  11,721
  12,339
  12,986
  13,664
  14,374
  15,118
  15,898
  16,716
  17,573
  18,472
  19,415
  20,404
Total equity, $m
  3,231
  3,450
  3,679
  3,916
  4,164
  4,421
  4,689
  4,968
  5,259
  5,563
  5,880
  6,211
  6,557
  6,918
  7,295
  7,690
  8,103
  8,535
  8,988
  9,462
  9,958
  10,477
  11,022
  11,592
  12,191
  12,818
  13,475
  14,164
  14,887
  15,646
Total liabilities and equity, $m
  7,444
  7,950
  8,477
  9,024
  9,594
  10,187
  10,804
  11,447
  12,118
  12,818
  13,549
  14,311
  15,108
  15,940
  16,809
  17,719
  18,671
  19,666
  20,709
  21,801
  22,944
  24,141
  25,396
  26,710
  28,089
  29,534
  31,048
  32,636
  34,302
  36,050
Debt-to-equity ratio
  0.870
  0.900
  0.920
  0.950
  0.970
  0.990
  1.000
  1.020
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
  1.160
  1.160
  1.170
  1.180
  1.180
  1.190
  1.190
  1.200
  1.200
  1.210
  1.210
Adjusted equity ratio
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434
  0.434

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  650
  698
  749
  801
  856
  913
  972
  1,033
  1,098
  1,165
  1,336
  1,409
  1,486
  1,566
  1,649
  1,737
  1,828
  1,924
  2,024
  2,129
  2,239
  2,355
  2,476
  2,602
  2,735
  2,874
  3,020
  3,174
  3,334
  3,503
Depreciation, amort., depletion, $m
  331
  344
  358
  372
  387
  402
  418
  435
  452
  470
  351
  371
  391
  413
  435
  459
  483
  509
  536
  564
  594
  625
  658
  692
  727
  765
  804
  845
  888
  933
Funds from operations, $m
  981
  1,043
  1,107
  1,173
  1,242
  1,315
  1,390
  1,468
  1,550
  1,635
  1,687
  1,780
  1,877
  1,978
  2,084
  2,195
  2,312
  2,433
  2,560
  2,694
  2,833
  2,980
  3,133
  3,294
  3,462
  3,639
  3,824
  4,019
  4,223
  4,436
Change in working capital, $m
  74
  77
  80
  84
  87
  91
  94
  98
  102
  107
  112
  116
  122
  127
  133
  139
  145
  152
  159
  167
  175
  183
  192
  201
  210
  221
  231
  243
  254
  267
Cash from operations, $m
  907
  965
  1,026
  1,090
  1,155
  1,224
  1,295
  1,370
  1,447
  1,528
  1,575
  1,663
  1,755
  1,851
  1,952
  2,057
  2,166
  2,281
  2,401
  2,527
  2,659
  2,797
  2,941
  3,093
  3,252
  3,418
  3,593
  3,776
  3,968
  4,170
Maintenance CAPEX, $m
  -180
  -193
  -206
  -219
  -234
  -248
  -264
  -280
  -296
  -314
  -332
  -351
  -371
  -391
  -413
  -435
  -459
  -483
  -509
  -536
  -564
  -594
  -625
  -658
  -692
  -727
  -765
  -804
  -845
  -888
New CAPEX, $m
  -214
  -221
  -230
  -240
  -249
  -259
  -270
  -282
  -294
  -306
  -320
  -334
  -348
  -364
  -381
  -398
  -416
  -436
  -456
  -478
  -500
  -524
  -549
  -575
  -603
  -632
  -663
  -695
  -729
  -765
Cash from investing activities, $m
  -394
  -414
  -436
  -459
  -483
  -507
  -534
  -562
  -590
  -620
  -652
  -685
  -719
  -755
  -794
  -833
  -875
  -919
  -965
  -1,014
  -1,064
  -1,118
  -1,174
  -1,233
  -1,295
  -1,359
  -1,428
  -1,499
  -1,574
  -1,653
Free cash flow, $m
  513
  551
  590
  631
  673
  716
  761
  809
  857
  908
  924
  979
  1,036
  1,096
  1,158
  1,223
  1,291
  1,362
  1,436
  1,513
  1,594
  1,679
  1,767
  1,860
  1,957
  2,059
  2,165
  2,277
  2,394
  2,517
Issuance/(repayment) of debt, $m
  272
  287
  298
  310
  322
  336
  350
  364
  380
  396
  413
  432
  451
  471
  492
  515
  539
  564
  590
  618
  647
  678
  710
  744
  780
  818
  857
  899
  943
  989
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  272
  287
  298
  310
  322
  336
  350
  364
  380
  396
  413
  432
  451
  471
  492
  515
  539
  564
  590
  618
  647
  678
  710
  744
  780
  818
  857
  899
  943
  989
Total cash flow (excl. dividends), $m
  784
  838
  888
  940
  995
  1,052
  1,111
  1,173
  1,237
  1,304
  1,337
  1,410
  1,487
  1,567
  1,651
  1,738
  1,830
  1,926
  2,026
  2,131
  2,241
  2,357
  2,478
  2,604
  2,737
  2,877
  3,023
  3,176
  3,337
  3,506
Retained Cash Flow (-), $m
  -214
  -220
  -228
  -238
  -247
  -257
  -268
  -279
  -291
  -304
  -317
  -331
  -346
  -361
  -378
  -395
  -413
  -432
  -452
  -474
  -496
  -520
  -544
  -571
  -598
  -627
  -657
  -689
  -723
  -758
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  570
  618
  660
  703
  748
  794
  843
  893
  946
  1,001
  1,020
  1,079
  1,141
  1,206
  1,273
  1,343
  1,417
  1,493
  1,574
  1,657
  1,745
  1,837
  1,933
  2,034
  2,139
  2,250
  2,365
  2,487
  2,614
  2,747
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  539
  549
  548
  542
  532
  518
  499
  477
  451
  423
  378
  347
  315
  282
  249
  217
  187
  158
  131
  108
  86
  68
  53
  40
  29
  21
  15
  10
  7
  4
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cintas Corporation is a provider of corporate identity uniforms through rental and sales programs, as well as a provider of related business services, including entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services, first aid and safety services and fire protection products and services. Its segments include uniform rental and facility services, and first aid and safety services. Its uniform rental and facility service segment offers services, which include rental and servicing of uniforms and other garments, including flame resistant clothing, mats, mops and shop towels, and other ancillary items. Its first aid and safety service segment offers services, which include first aid and safety products and services. Rental processing plants, rental branches, first aid and safety facilities, fire protection facilities, direct sales offices, distribution centers and manufacturing facilities are all utilized by the businesses included in All Other.

FINANCIAL RATIOS  of  Cintas Corporation (CTAS)

Valuation Ratios
P/E Ratio 42.6
Price to Sales 3.9
Price to Book 8.9
Price to Tangible Book
Price to Cash Flow 26.8
Price to Free Cash Flow 41.8
Growth Rates
Sales Growth Rate 11%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -0.7%
Cap. Spend. - 3 Yr. Gr. Rate 13.3%
Financial Strength
Quick Ratio 1
Current Ratio 0.6
LT Debt to Equity 120.3%
Total Debt to Equity 136.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.8%
Ret/ On Assets - 3 Yr. Avg. 11.8%
Return On Total Capital 11.2%
Ret/ On T. Cap. - 3 Yr. Avg. 15.3%
Return On Equity 23.2%
Return On Equity - 3 Yr. Avg. 27%
Asset Turnover 1
Profitability Ratios
Gross Margin 44.7%
Gross Margin - 3 Yr. Avg. 43.9%
EBITDA Margin 16.6%
EBITDA Margin - 3 Yr. Avg. 17.7%
Operating Margin 14.5%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 12.9%
Pre-Tax Margin - 3 Yr. Avg. 14.1%
Net Profit Margin 9%
Net Profit Margin - 3 Yr. Avg. 11.1%
Effective Tax Rate 33.5%
Eff/ Tax Rate - 3 Yr. Avg. 35.6%
Payout Ratio 29.5%

CTAS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CTAS stock intrinsic value calculation we used $6477 million for the last fiscal year's total revenue generated by Cintas Corporation. The default revenue input number comes from 0001 income statement of Cintas Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CTAS stock valuation model: a) initial revenue growth rate of 7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.8%, whose default value for CTAS is calculated based on our internal credit rating of Cintas Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cintas Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CTAS stock the variable cost ratio is equal to 84.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $42 million in the base year in the intrinsic value calculation for CTAS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Cintas Corporation.

Corporate tax rate of 27% is the nominal tax rate for Cintas Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CTAS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CTAS are equal to 47%.

Life of production assets of 16.9 years is the average useful life of capital assets used in Cintas Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CTAS is equal to 16.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3016.526 million for Cintas Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 104.549 million for Cintas Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cintas Corporation at the current share price and the inputted number of shares is $20.3 billion.

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