Renting work uniforms and selling sanitation supplies and entrance mats don’t exactly constitute the sexiest business activity around. But they have been plenty profitable for Cintas Corp. (CTAS), the country’s biggest uniform rental company.
Cintas has more than 800,000 businesses as customers and is branching into the first aid/fire safety and document storage/destruction sectors.
Cintas faces two well-established competitors there, Tyco International (TYC) in first aid/fire safety and Iron Mountain (IRM) in documents. But Cintas has posted a strong track record, so it is a safe industrial stock to consider.
The company has produced operating profit margins of 11 percent to 17 percent over the last decade, even as revenue dropped during the Great Recession, according to Morningstar data.
Operational cash flow grew at a solid 8 percent compounded annual rate during that period, and Cintas has used that money to expand.
In its fiscal third quarter ended Feb. 28, Cintas enjoyed a 21 percent jump in profit, to $59.1 million from $49 million a year earlier. Revenue rose almost 9 percent to $937.8 million. Both figures exceeded analysts’ expectations.
The company was pleased, of course. “Our revenue momentum of the past several quarters continued throughout our third quarter, propelled largely by improvements in sales productivity and customer retention,” CEO Scott Farmer said in a statement accompanying the earnings report.
He noted that the company’s organic growth rate, adjusting for acquisitions, registered 5.5 percent, up from 4.2 percent in the second quarter and 2.8 percent in the first quarter.
In May, Cintas announced a strategic alliance with Diversey, a leading global provider of commercial cleaning, sanitation, and hygiene solutions, to sell its wares to restaurants.
Analysts at Zacks Investment Research complimented the deal. “The new offering will benefit customers in many ways,” they wrote. That includes access to proven and trusted products.
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