CINTAS CORP. $31 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 153.7 million; Market cap: $4.8 billion; WSSF Rating: Average) sells and rents uniforms to over 800,000 businesses in the United States and Canada. Uniforms and other business supplies such as entrance mats, mops and hygiene products account for 85% of Cintas’s revenue.
The remaining 15% comes from a variety of other business services. These include first aid kits, fire extinguishers and smoke alarms, and document storage and shredding services.
Cintas’s stock fell to around $25 in July 2008 due to fears that the recent downturn will prompt businesses to curtail spending on uniforms and other supplies. Rising fuel prices have also increased Cintas’s delivery costs.
However, the company continues to dominate its niche businesses. That gives it reliable revenue and cash flows. Cintas’s recent plan to expand in Europe, Latin America and Asia will also cut its exposure to North America.
In the fiscal year ended May 31, 2008, Cintas’s earnings grew just 0.3%, to $335.4 million from $334.5 million in the prior year. Cintas is an aggressive buyer of its own stock, so per-share earnings rose 2.9%, to $2.15 from $2.09, on fewer shares outstanding. The company still has $228 million remaining under its current share repurchase plan.
Revenue grew 5.4%, to $3.9 billion from $3.7 billion, mainly due to acquisitions and strong demand for document management and first aid services.
The company will probably earn $2.25 a share in fiscal 2009, and the stock trades at 13.8 times that estimate. It also trades at 1.2 times its revenue of $25.30 a share. Cintas has paid an annual dividend each year since it went public in 1983. The most recent payment of $0.46 in March 2008 implies a yield of 1.5%.
Cintas is a buy.
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