Should You Be Concerned About Cintas Corporation's (NASDAQ:CTAS) Earnings Growth?
For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Cintas Corporation (NasdaqGS:CTAS) useful as an attempt to give more color around how Cintas is currently performing.
View our latest analysis for Cintas
How Well Did CTAS Perform?
CTAS's trailing twelve-month earnings (from 30 November 2019) of US$915m has declined by -1.4% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 20%, indicating the rate at which CTAS is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Cintas has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the US Commercial Services industry of 6.4%, indicating Cintas has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Cintas’s debt level, has declined over the past 3 years from 23% to 19%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 59% to 88% over the past 5 years.
What does this mean?
Cintas's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research Cintas to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CTAS’s future growth? Take a look at our free research report of analyst consensus for CTAS’s outlook.
Financial Health: Are CTAS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 November 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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