Cintas Corporation (CTAS)

Conclusion

Cintas Corporation provides uniform rental, facility services, and first aid and safety products to businesses in the United States, Canada and Latin America. At a price of 223.16 USD on 2026-11-09, the market capitalisation is 88.6 billion USD.

The verdict is overvalued. Today's multiples sit above their own ten-year medians: the price-to-earnings ratio is 43.0x against a median of 37.6x, a premium of 14.4%, and enterprise value to EBITDA is 28.3x against 23.9x, a premium of 18.5%. The DCF gives 110.02 USD per share at a discount rate of 9.2%. The fair value band runs from 116.48 to 174.72 USD with a midpoint of 145.60 USD, giving a margin of safety of -34.8% at the current price. The reverse DCF implies growth of 17.2% a year, while revenue has grown at 9.6% a year over five years and free cash flow per share at 10.4%. The fair value from historical multiples is 181.18 USD.

The case rests on the business quality: return on invested capital of 28.1% against a WACC of 9.0%, a trailing free cash flow conversion of 98.7%, and revenue growth in each of the last ten years. The weakest numbers are the price-to-book ratio of 17.0x against a median of 12.2x, the price-to-free-cash-flow ratio of 43.6x against 35.4x, and the implied growth of 17.2%, which sits well above the growth delivered.

Financial health

The financial strength is green, held up by all four measures assessed as good. The current ratio is 1.45 and the net debt to EBITDA ratio is 0.77x, with a debt to equity ratio of 0.52 and interest coverage of 25.3x. The quick ratio is 0.68, which is lower but not assessed. The Altman Z-score is 13.58, in the safe zone. The Altman model was designed for manufacturers, so it is only a rough guide for a services company like Cintas. Insolvency risk: low, about 0.2% by the estimate of the Ohlson model over one to two years. The company's debt has also fallen by 9.7% a year over five years, measured against revenue growth.

Earnings quality

The earnings quality is green, supported by a free cash flow conversion of 98.7% on a trailing basis and 98.8% over five years. The accrual ratio is -0.0272, which means cash earnings exceed reported earnings. Stock-based compensation is 1.1% of revenue, and free cash flow after it is 1.90 billion USD. The share count has fallen at a compound rate of 1.2% over five years, which points to buybacks. The Piotroski score is 8 out of 9, and the Beneish M-score of -2.51 is in the unlikely range for manipulation. The company beat earnings estimates in seven of the last eight quarters, with an average surprise of 3.4%. Analysts raised the current-year estimates by 1.0% over 90 days, with 14 upward revisions and no downward revisions in the last 30 days.

Profitability

The profitability is green, with all four measures assessed as good. The gross margin is 51.0% against a ten-year median of 46.4%, and the operating margin is 23.4% against 19.8%. The net margin is 17.8% against 15.5%. Return on invested capital is 28.1%, with a five-year median of 25.0%, and the ROIC minus WACC value is 19.1%, which creates value. Return on equity is 39.6%, but the DuPont split shows that most of it comes from margins (17.8%) and asset turnover (1.07x), with leverage contributing only an equity multiplier of 2.05x.

Growth

The growth is green, with revenue compounding at 8.5% over three years, 9.6% over five years and 8.7% over ten years. Earnings per share grew faster, at 14.7%, 13.8% and 12.1% over the same periods. Free cash flow per share compounded at 14.8% over three years, 10.4% over five years and 26.7% over ten years. Revenue grew in all 10 of the last ten years. Analysts expect earnings per share to grow 11.2% in the next fiscal year, with estimates revised up by 1.1% over 90 days.

Valuation

The valuation is red, as the verdict is overvalued and the price sits above every ten-year median. The price-to-sales ratio is 7.7x against 5.7x, a premium of 34.4%, and the price-to-book ratio is 17.0x against 12.2x, a premium of 39.2%. The DCF gives 110.02 USD per share at a discount rate of 9.2%, with the terminal value making up 57.3% of it. The fair value band runs from 116.48 to 174.72 USD, and the fair value from historical multiples is 181.18 USD. The reverse DCF implies growth of 17.2%, against 9.6% revenue growth over five years. The dividend yield is 0.8%, with a payout of 35.6% of free cash flow.

Risks

A fall in free cash flow conversion from its current level would weaken the earnings case, since the valuation already assumes high-quality cash earnings. Growth slowing toward the five-year revenue rate of 9.6% would leave the implied growth of 17.2% unmet, which would weigh on the share price. A decline in the price-to-book ratio toward its median of 12.2x would bring the price closer to the fair value band. The analysis does not include a debt maturity schedule or revenue by segment, so refinancing risk and the contribution of individual businesses cannot be assessed. The fair value figures are built on fixed assumptions, including a 5% equity risk premium and capped growth, so they are an order-of-magnitude guide rather than a price target.