CTAS - Embedded Expectations Analysis - 2020 02 10
ï€ Cintas Corporation (CTAS:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 24.8x Uniform P/E. At these levels, markets are pricing in bullish expectations for the firm, but management may be concerned about growth, their inventories, and pricingï€ Specifically, management may lack confidence in their ability to maintain Uniform Direct sale business and same workday growth rates, improve their route optimization, and offset headwinds from inefficiencies and holiday disruptions. Furthermore, they may be concerned about political uncertainty and their ability to upgrade legacy G&K uniforms to Cintas or Carhartt uniforms. Finally, they may lack confidence in their ability to demonstrate value to customers, maintain pricing strength, and find opportunities for their support services representatives
Cintas 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. The company's segments are Uniform Rental and Facility Services, which consists of the rental and servicing of uniforms and other garments, including flame resistant clothing, mats, mops and shop towels and other ancillary items; and The First Aid and Safety Services, which consists of first aid and safety products and services.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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