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    CTAS · NMS · Industrials

    Cintas Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 80.02

    Market price

    USD 197.64

    Implied upside

    -59.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 26.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 80.02-59.5%
    Exit multiple
    USD 161.64-18.2%
    Market price
    USD 197.64

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 12.2bnUSD 13.3bnUSD 14.4bnUSD 15.6bnUSD 16.9bn+8.5%
    EBITUSD 2.7bnUSD 2.9bnUSD 3.2bnUSD 3.4bnUSD 3.7bn+8.5%
    NOPATUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.7bnUSD 3.0bn+8.5%
    Add depreciation & amortisationUSD 576.0mUSD 625.1mUSD 678.3mUSD 736.1mUSD 798.7m+8.5%
    Less capital expenditureUSD -473.2mUSD -513.5mUSD -557.2mUSD -604.7mUSD -656.1m+8.5%
    Less increase in working capitalUSD -314.4mUSD -341.2mUSD -370.2mUSD -401.7mUSD -435.9m+8.5%
    Free cashflow to firmUSD 1.9bnUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.7bn+8.5%
    Discount factor0.95360.86710.78850.71700.6520-
    Present valueUSD 1.8bnUSD 1.8bnUSD 1.8bnUSD 1.8bnUSD 1.7bn-1.3%
    Present Value Of The ForecastUSD 9.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.942Reported 0.913, pulled toward 1.0 (Blume)
    Cost of equity10.18%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 79.1bn96.7% of capital
    Total debtUSD 2.7bn3.3% of capital, book value as a proxy
    Tax rate20.3%Effective, capped at statutory
    WACC9.97%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 80.02

    74% of EV

    Forecast FCFF, final year
    USD 2.7bn
    Capex at depreciation, working capital in reinvestment
    USD 3.2bn
    Less reinvestment at g/ROIC (9.9% of NOPAT)
    USD -317.0m
    Capitalised
    USD 2.9bn
    ROIC (reported)
    25.4%
    Terminal value, undiscounted
    USD 39.8bn
    Terminal value, discounted
    USD 25.9bn
    Enterprise value
    USD 34.9bn
    Less net debt
    USD 2.4bn
    Equity value
    USD 32.5bn

    Exit at 20.0x EBITDA

    Value per shareUSD 161.64

    87% of EV

    Terminal value, undiscounted
    USD 90.6bn
    Terminal value, discounted
    USD 59.1bn
    Enterprise value
    USD 68.1bn
    Less net debt
    USD 2.4bn
    Equity value
    USD 65.7bn

    Spread between methods: 68%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.97%99.95105.43111.90119.64129.08
    8.97%85.4489.1893.4898.49104.40
    9.97%74.3777.0280.0283.4387.35
    10.97%65.6667.6069.7572.1674.87
    11.97%58.6360.0761.6663.4165.35

    Outlined: this model. Green text: above today's price of 197.64. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.5%32.9%+24.4pp
    EBIT margin22.0%53.0%+31.0pp
    Discount rate10.0%5.7%-4.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.