Uniform-rental firm Cintas (NASDAQ:CTAS) just reported another well-tailored quarter, and though results were slightly below analyst expectations, this is a company to keep an eye on.
Our Fool by Numbers will walk you through the second-quarter details released Tuesday night, but in a nutshell, Cintas continued its steady ways, posting 10.5% sales growth and 10.9% earnings growth. Management gave fiscal 2007 diluted earnings guidance of $2.10 to $2.20, which represents about 8% growth from fiscal 2006.
If this year ends according to plan, it would mark the 38th consecutive year of record sales and earnings growth. That type of consistency should interest investors. High-single-digit growth is not spectacular by any means, but the ability to grow steadily year after year is.
Cintas also grows by acquiring other rental and service firms. I would characterize this as more risky than organic growth, but again, management has a proven track record of bringing new purchases into the corporate fold.
Another potential negative I'm looking into stems from a recent Forbes article that included a number of aggressive sales tactics the company uses to sign and keep clients. At best, the offenders represent a few bad apples, and the tactics are not widespread, but they could also indicate that growth is becoming harder to find in the uniform industry. That's been a concern to several investors who also keep tabs on Aramark (NYSE:RMK), Angelica (NYSE:AGL), UniFirst (NYSE:UNF), and G&K Services (NASDAQ:GKSR). I've received a couple of reader comments on the subject, but I'm always interested in learning more. If you have any particular scuttlebutt you'd like to share, feel free to post it to the Motley Fool's growing CAPS community.
Overall, Cintas continues to post solid cash flow metrics, and free cash flow has exceeded reported net income for the first six months of fiscal 2007, demonstrating that the company is a steady cash generator. That has led to modest debt loads, because capital spending, acquisitions, and share repurchases are largely funded via internally generated capital.
At 20 times trailing earnings, the shares aren't a steal, but that multiple will only decrease as long as bottom-line growth continues. In any case, Cintas has treated its shareholders well over the years; the stock is a 10-bagger for investors who have held the shares since 1990.
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.
