Today we're going to take a look at the well-established Cintas Corporation (NASDAQ:CTAS). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$226 at one point, and dropping to the lows of US$183. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cintas' current trading price of US$183 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Cintas's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Cintas Worth?
According to our valuation model, the stock is currently overvalued by about 28%, trading at US$183 compared to our intrinsic value of $142.98. This means that the opportunity to buy Cintas at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Cintas's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Cintas look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 29% over the next couple of years, the future seems bright for Cintas. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? CTAS's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CTAS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on CTAS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for CTAS, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Cintas at this point in time. You'd be interested to know, that we found 1 warning sign for Cintas and you'll want to know about it.
If you are no longer interested in Cintas, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
