Cintas was founded in 1929 (as Acme Industrial Laundry Company, then rebranded for Cintas in 1972). Company provides services for different businesses mainly in North America. Most of revenues come from Rental Uniforms and Ancillary Products:

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Company is correlated with economy – when employment is rising then company is renting more uniforms for clients.

Business should grow in a single digit number. Quite boring and repetitive business – perfect for dividend growth investors!

 

As it comes to financials (estimates):

Market cap ~ $9.5B

Net debt ~$0.5B

Payout ratio ~25%

Beta = 0.8

Dividend yield 1.1% + share buyback around 4%

 

Estimated valuation ratios:

EV/EBITDA = 11

P/E = 22

 

Cintas is one of The Dividend Aristocrats paying increasing dividends since 1983 year. Currently dividend yield is around 1.1% – low, historically it was even around 2%, but on the other hand buybacks are stable and relatively high – 4%. Truth to tell I do not like companies buying back shares when they are so expensive (see on multiples of Cintas + share are on all-time highs).

 

Drawdown risk analysis:

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Going out of a crisis was long, but now shares are traded around all time high with multiples a little above S&P500. As in many other cases – shares at all time high are not interesting for me. I will wait for some 20% drawdown to reconsider buying shares $70.

 

Summing up, Cintas has strong market position and durable competitive advantage, but I see no point in buying shares at $90. I am investing in long term and with current valuation I would take a bet that within 5 years there will be a time when Cintas shares will be lower.

 

Disclosure CTAS – no position