Cintas: A Boring Buy

04/21/2015 7:00 am EST


Jim Powell

Principal Analyst, Global Changes & Opportunities

On Wall Street, there is no such thing as a sure thing. However, momentum can keep a stock moving up much longer than anyone might expect, observes Jim Powell, editor of Global Changes & Opportunities Report.

Momentum almost always reflects a company’s financial success. If earnings continue to grow year after year, the stock can keep pace.

That is especially true for a company that provides goods and services that are so mundane, that it rarely attracts aggressive investors who might push the stock price ahead of where it should be.

In a bull market, a stock that doesn’t get pushed up very far is also less likely than others to suffer a sharp correction. In my opinion, Cintas Corporation (CTAS) fits the momentum model and is likely to keep rising.

The company is North America’s leading provider of business uniforms, entry mats, restroom supplies, tile and carpet cleaning, first aid, fire and safety supplies, document shredding, and related dull-as-dust products and services.

The company has 430 facilities and nine distribution centers in the US and Canada. Cintas was founded in 1968 and has about 900,000 customers. Have I put you to sleep yet?

For the most part, the only people who know about Cintas and keep track of its business are portfolio managers for pension funds, insurance companies, college endowments, and the like.

Every quarter, the number crunchers look at Cintas’ reports and adjust the stock price accordingly. And, they have been doing it for a long time.

Cintas is not a 100% domestic company, but it is close. For the most recent three years, revenues in currencies other than the US dollar represented less than 10% of the company’s total.

I think the company’s low exposure to export problems, its long-term business success, and its momentum in the stock market makes the stock a good bet for long-term gains.

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