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Let's talk about the popular Cintas Corporation (NASDAQ:CTAS). The company's shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$517 at one point, and dropping to the lows of US$464. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cintas' current trading price of US$505 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cintas’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Cintas
What's The Opportunity In Cintas?
The stock is currently trading at US$505 on the share market, which means it is overvalued by 28% compared to my intrinsic value of $395.30. This means that the opportunity to buy Cintas at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Cintas’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Cintas generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Cintas' earnings over the next few years are expected to increase by 34%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in CTAS’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CTAS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CTAS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CTAS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.