Cintas (CTAS)

Uniform and facility services provider Cintas (NASDAQ:CTAS) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 8.4% year on year to $2.61 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $10.29 billion at the midpoint. Its GAAP profit of $1.13 per share was 7.1% above analysts’ consensus estimates.

Company Overview

Starting as a family business collecting and cleaning shop rags in Cincinnati, Cintas (NASDAQ:CTAS) provides corporate identity uniforms, facility services, and safety products to over one million businesses across North America.

Growing regulatory pressure on environmental compliance and increasing corporate ESG commitments should buoy the sector for years to come. On the other hand, environmental regulations continue to evolve, and this may require costly upgrades, volatility in commodity waste and recycling markets, and labor shortages in industrial services. As for digitization, a theme that is impacting nearly every industry, the increasing use of data, analytics, and automation will give rise to improved efficiency of operations. Conversely, though, the benefits of digitization also come with challenges of integrating new technologies into legacy systems.

Cintas competes with Aramark (NYSE:ARMK), UniFirst (NYSE:UNF), and G&K Services in the uniform rental space, while facing competition from Grainger (NYSE:GWW) and MSC Industrial (NYSE:MSM) in safety supplies, and Johnson Controls (NYSE:JCI) in fire protection services.

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $10.14 billion in revenue over the past 12 months, Cintas is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Cintas grew its sales at a decent 6.9% compounded annual growth rate over the last five years. This shows its offerings generated slightly more demand than the average business services company, a helpful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Cintas’s annualized revenue growth of 8.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

This quarter, Cintas grew its revenue by 8.4% year on year, and its $2.61 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.8% over the next 12 months, a slight deceleration versus the last two years. We still think its growth trajectory is satisfactory given its scale and indicates the market is baking in success for its products and services.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Cintas has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 20.7%.

Analyzing the trend in its profitability, Cintas’s operating margin rose by 4.9 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Cintas generated an operating profit margin of 23.4%, up 1.7 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Cintas’s EPS grew at a spectacular 14.2% compounded annual growth rate over the last five years, higher than its 6.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Cintas’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Cintas’s operating margin expanded by 4.9 percentage points over the last five years. On top of that, its share count shrank by 4.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q1, Cintas reported EPS at $1.13, up from $0.96 in the same quarter last year. This print beat analysts’ estimates by 7.1%. Over the next 12 months, Wall Street expects Cintas’s full-year EPS of $4.33 to grow 7.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Cintas has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 16.4% over the last five years.

Taking a step back, we can see that Cintas’s margin expanded by 1.8 percentage points during that time. This is encouraging because it gives the company more optionality.

Cintas’s free cash flow clocked in at $522.1 million in Q1, equivalent to a 20% margin. The company’s cash profitability regressed as it was 2.9 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Cintas’s five-year average ROIC was 24.7%, placing it among the best business services companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Cintas’s ROIC averaged 4 percentage point increases each year. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Cintas reported $243.4 million of cash and $2.69 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.78 billion of EBITDA over the last 12 months, we view Cintas’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $93.94 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Cintas beat analysts’ EPS expectations this quarter. We were also happy its full-year EPS guidance narrowly outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance was in line. Overall, this quarter had some key positives. The stock traded up 5% to $203.20 immediately after reporting.

Updated: July 10, 2025 at 11:34 PM EDT

Are you wondering whether to buy Cintas or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Cintas is an amazing business ranking highly on our list. First, the company’s revenue growth was good over the last five years, and analysts believe it can continue growing at these levels. On top of that, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, and its impressive operating margins show it has a highly efficient business model.

Cintas’s P/E ratio based on the next 12 months is 46.5x. Expectations are high given its premium multiple, but we’ll happily own Cintas as its fundamentals shine bright. It’s often wise to hold investments like this for at least three to five years, as the power of long-term compounding negates short-term price swings that can accompany high valuations.

Wall Street analysts have a consensus one-year price target of $214.17 on the company (compared to the current share price of $215.96).