Cintas Corp. (NASDAQ:CTAS)

Goodwill

Goodwill exhibits a consistent upward trend throughout the periods, increasing steadily from 2,842,441 thousand US dollars in 2019 to 3,212,424 thousand US dollars in 2024. This gradual increase suggests ongoing acquisitions or reassessments contributing positively to intangible asset values.

Service contracts

Service contracts also display a continuous increase over the years, rising from 928,635 thousand US dollars in 2019 to 1,033,762 thousand US dollars in 2024. The progression indicates expanding contractual assets, potentially reflecting business growth or renewed contracts.

Capitalized contract costs

Capitalized contract costs show a notable growth trajectory, starting at 277,016 thousand US dollars in 2019 and reaching 777,535 thousand US dollars in 2024. This sharp increase suggests a growing investment in acquiring or developing contracts, which may lead to future revenue generation.

Noncompete and consulting agreements and other

This category also increases year over year, from 92,614 thousand US dollars in 2019 to 233,334 thousand US dollars in 2024. The significant rise indicates increasing commitments related to noncompete arrangements and consulting engagements.

Service contracts and other assets, carrying amount

The carrying amount of service contracts and other assets steadily climbs from 1,298,265 thousand US dollars in 2019 to 2,044,631 thousand US dollars in 2024, reflecting cumulative asset growth in this segment.

Accumulated amortization

Accumulated amortization demonstrates a steady increase in absolute terms (with negative values indicating accumulated expense): from -563,355 thousand US dollars in 2019 to -1,297,778 thousand US dollars in 2024. This trend is typical as intangible assets are amortized over time, reflecting ongoing charge-offs against asset values.

Service contracts and other assets, net

The net amount of service contracts and other assets fluctuates slightly, starting at 734,910 thousand US dollars in 2019, dipping to 712,287 thousand US dollars in 2020, and then generally rising to 746,853 thousand US dollars by 2024. While the net figure shows minor variability, it remains relatively stable over the period despite increases in gross carrying amounts and amortization.

Goodwill, service contracts and other assets (total)

The combined total of goodwill, service contracts, and other assets reflects an overall increasing trend, moving from 3,577,351 thousand US dollars in 2019 to 3,959,277 thousand US dollars in 2024. This increase signifies growth in intangible asset base, supported by acquisitions or capital investments.

The data reveals notable differences between reported and goodwill-adjusted financial figures over the six-year period ending May 31, 2024.

Total Assets

Reported total assets show a steady increase from approximately 7.44 billion USD in 2019 to 9.17 billion USD in 2024, indicating consistent growth at the company level. This growth reflects a general upward trend with a minor dip between 2021 and 2022.

Adjusted total assets, which exclude goodwill, also increase over the period but at a lower absolute level and noticeably fluctuate more. Starting at around 4.59 billion USD in 2019, adjusted assets peak in 2021 at approximately 5.32 billion USD, then decline in 2022 before rising again to 5.96 billion USD in 2024. The dip in 2022 suggests changes in asset composition or adjustments related to goodwill.

Shareholders’ Equity

Reported shareholders’ equity increases overall from around 3.00 billion USD in 2019 to 4.32 billion USD in 2024. Unlike total assets, equity exhibits more volatility, with a significant dip seen in 2022 before recovering strongly by 2024. This pattern indicates fluctuations in retained earnings, capital adjustments, or other equity components.

Goodwill-adjusted shareholders’ equity is substantially lower than its reported counterpart, beginning at just 160 million USD in 2019 and increasing to roughly 1.10 billion USD in 2024. Adjusted equity shows notable volatility, including a sharp rise in 2021 followed by a steep decline by 2022 and a subsequent rebound through 2023 and 2024. The large swings emphasize the material impact of goodwill adjustments on equity values.

Overall, the trends suggest that goodwill and related intangible assets significantly affect the reported figures, inflating total assets and shareholders’ equity. The adjusted data provide a more conservative view, highlighting potential fluctuations in underlying tangible and financial assets. The company’s growth in reported terms is clear and steady, but the goodwill adjustments reveal episodes of reassessment or impairment, particularly around 2022.

The analysis of the financial data over the six-year period indicates several noteworthy trends and patterns related to asset utilization, financial leverage, and profitability metrics.

Total Asset Turnover

The reported total asset turnover shows a generally increasing trend from 0.93 in 2019 to 1.05 in 2024, suggesting improving efficiency in using reported assets to generate revenue. The adjusted total asset turnover, which accounts for goodwill adjustments, consistently exceeds the reported figures, starting at 1.5 in 2019 and stabilizing at 1.61 from 2023 to 2024. This elevated and relatively stable adjusted turnover indicates higher asset productivity when intangible assets are excluded or adjusted.

Financial Leverage

Reported financial leverage decreases moderately from 2.48 in 2019 to 2.12 in 2024, implying a gradual reduction in the use of debt relative to equity. The adjusted financial leverage exhibits significant volatility and a pronounced decline overall, starting extremely high at 28.66 in 2019, then falling sharply to 5.4 by 2024. The large fluctuations suggest adjustments related to goodwill significantly impact leverage metrics, but the downward progression indicates a move toward a more conservative capital structure when considering adjusted values.

Return on Equity (ROE)

Reported ROE remains robust throughout the period, fluctuating between 27.08% and 37.35%, with a peak in 2022. This reflects strong profitability relative to shareholders' equity. Conversely, the adjusted ROE demonstrates extreme volatility and very high values, starting at 552.15% in 2019 and sharply decreasing to 142.36% in 2024. Despite the decrease, adjusted ROE remains significantly higher than reported ROE, which could imply that equity adjustments for goodwill significantly affect this profitability ratio, possibly exaggerating returns due to lower adjusted equity base.

Return on Assets (ROA)

Reported ROA shows a steady upward trend from 11.9% in 2019 to 17.14% in 2024, indicating improving overall asset efficiency in generating earnings. Adjusted ROA also follows an increasing pattern but at higher levels, rising from 19.26% to 26.38%, which confirms that once intangible assets are adjusted out, the company's asset-based profitability improves more markedly over time.

Overall, the data reveals consistent improvement in asset efficiency and profitability, alongside a gradual reduction in financial leverage. The adjustments for goodwill significantly alter the magnitude of leverage and profitability metrics, highlighting the importance of considering intangible assets in financial analysis for a more comprehensive view.

Total Assets

There is a consistent upward trend in reported total assets, rising from 7,436,662 thousand US dollars in 2019 to 9,168,817 thousand US dollars in 2024. This reflects gradual asset growth over the six-year period. Adjusted total assets, which exclude goodwill, also show an increasing trend, moving from 4,594,221 thousand US dollars in 2019 to 5,956,393 thousand US dollars in 2024, although the growth appears somewhat more moderate compared to reported assets. Notably, adjusted assets experienced a slight decline in 2022 before resuming growth in subsequent years.

Total Asset Turnover Ratios

The reported total asset turnover ratio exhibits a declining trend from 0.93 in 2019 to a low of 0.86 in 2021, followed by a recovery to 1.05 in 2024. This suggests an initial decrease in efficiency in using total assets to generate revenue, with improvement seen in recent years. In contrast, the adjusted total asset turnover ratio, calculated excluding goodwill, is consistently higher than the reported ratio throughout the period, starting at 1.5 in 2019 and slightly declining to 1.34 in 2021, then increasing again to 1.61 in both 2023 and 2024. This indicates that the core asset base (excluding goodwill) has exhibited stronger and more stable efficiency in generating revenue compared to the total asset base inclusive of goodwill.

Insights

The divergence between reported and adjusted total assets and their respective turnover ratios highlights the impact of goodwill on asset valuation and efficiency metrics. The adjusted figures suggest a more optimistic view of asset efficiency by excluding intangible assets. Overall, despite fluctuations, the company appears to be improving the utilization of its asset base in recent years, as shown by the rising turnover ratios. The steady asset growth supports the notion of ongoing investment and expansion.

The analysis of the financial data reveals distinct trends in both reported and goodwill-adjusted figures over the six-year period ending May 31, 2024.

Total Assets

Reported total assets show a generally increasing trend, rising from approximately $7.44 billion in 2019 to about $9.17 billion in 2024. This indicates consistent growth in the overall asset base. Adjusted total assets, which account for goodwill adjustments, also increase over the period, though at a lower absolute level due to the exclusion or adjustment of goodwill. Adjusted assets grew from roughly $4.59 billion in 2019 to approximately $5.96 billion in 2024, demonstrating steady asset expansion in the adjusted view.

Shareholders’ Equity

Reported shareholders’ equity displays moderate growth, increasing from about $3.00 billion in 2019 to roughly $4.32 billion in 2024. However, fluctuations are noticeable, with a decline observed in 2022 before rebounding in subsequent years. Adjusted shareholders’ equity, which reflects changes after goodwill adjustments, starts at a much lower base of $160 million in 2019 and rises progressively to about $1.10 billion by 2024. Despite starting from a small adjusted equity base, the substantial growth signifies improved net asset positioning when removing goodwill effects, though the values remain significantly lower than reported figures.

Financial Leverage Ratios

Reported financial leverage ratios trend downward slightly, falling from 2.48 in 2019 to 2.12 in 2024. This suggests a moderate reduction in reliance on debt relative to equity or an increase in equity relative to debt over time. The adjusted financial leverage shows marked volatility and a generally much higher level compared to reported ratios. Starting at an extremely high 28.66 in 2019, it decreases sharply to 5.40 by 2024, reflecting the impact of goodwill adjustments on the equity base. Peaks and troughs in adjusted leverage, particularly noticeable in 2020 and 2022, imply significant fluctuations in adjusted equity relative to debt, potentially due to impairment or reevaluation of goodwill.

Overall, the data suggest consistent asset growth accompanied by an expanding equity base in both reported and adjusted terms. The lower and more volatile adjusted shareholders’ equity results in substantially higher adjusted financial leverage figures, highlighting the impact of goodwill and related adjustments on the company’s financial structure. The reduction in both reported and adjusted leverage ratios over time indicates a gradual strengthening of the company’s equity position relative to its liabilities.

Shareholders’ Equity Trends

The reported shareholders’ equity showed a general upward trend from 3,002,721 thousand US dollars in May 2019 to 4,316,372 thousand US dollars in May 2024. There was a slight dip in May 2022, where equity decreased to 3,308,196 thousand US dollars from the previous year's high of 3,687,847 thousand US dollars, but this was followed by a recovery and continued growth through May 2024.

In contrast, the adjusted shareholders’ equity, which accounts for goodwill adjustments, exhibited greater volatility. It increased significantly from 160,280 thousand US dollars in 2019 to 774,778 thousand US dollars in 2021. However, it fell substantially in 2022 to 265,220 thousand US dollars before rising again to 1,103,948 thousand US dollars by May 2024. These fluctuations suggest variable impacts from goodwill adjustments across the periods analyzed.

Return on Equity (ROE) Patterns

The reported ROE showed consistent strong performance, generally fluctuating between approximately 27% and 37%. The lowest point was in 2020 at 27.08%, likely reflecting external economic challenges in that year, while the highest was 37.35% in 2022. The ROE remained robust thereafter, indicating effective generation of profits relative to the reported equity base.

Adjusted ROE figures, which factor in goodwill, showed markedly higher values and more pronounced volatility. Starting from an exceptionally high 552.15% in 2019, the adjusted ROE declined sharply to 239.89% in 2020 and further to 143.39% in 2021. Notably, 2022 saw a rebound to 465.94%, followed by decreases to 166.88% and 142.36% in 2023 and 2024 respectively. This pattern suggests that goodwill adjustments had a considerable impact on the equity base and profitability ratios, leading to amplified returns when adjusted equity is lower.

Insights and Observations

The divergence between reported and adjusted equity values indicates the presence of significant goodwill on the balance sheet, which greatly influences the adjusted equity base and associated returns.

The relatively stable reported ROE contrasted with the volatile adjusted ROE reinforces the idea that goodwill adjustments can distort the perception of profitability when based on equity figures.

The increase in adjusted shareholders’ equity in 2023 and 2024 alongside a decline in adjusted ROE suggests that while the equity base grew, profit growth may not have kept pace proportionally, moderating returns on the adjusted basis.

Overall, the data reflects a company maintaining strong profitability relative to reported equity throughout the period, but with significant impact from goodwill on adjusted measures, resulting in notable fluctuations in equity and associated return metrics.

Total Assets

The reported total assets have shown an overall upward trend from May 31, 2019, to May 31, 2024. Starting at approximately $7.44 billion, the assets increased steadily with minor fluctuations, reaching nearly $9.17 billion in 2024. This indicates continuous growth in the asset base.

Adjusted total assets, which exclude goodwill, also increased from about $4.59 billion in 2019 to approximately $5.96 billion in 2024. However, the increase experienced some variability, particularly showing a decrease in 2022 before resuming the upward trend. This suggests asset growth excluding goodwill but at a somewhat uneven rate.

Return on Assets (ROA)

Reported ROA steadily improved over the period. Beginning at 11.9% in 2019, it experienced a slight dip in 2020 but then consistently rose each year to reach 17.14% in 2024. This demonstrates enhanced profitability relative to total assets over time.

Adjusted ROA, reflecting profitability based on assets excluding goodwill, also displayed a positive trajectory. Starting from a higher base of 19.26% in 2019, it slightly declined in 2020 but then increased significantly to reach 26.38% by 2024. The adjusted ROA consistently remained above the reported ROA throughout, indicating stronger returns when goodwill is excluded from asset calculations.

Overall Insights

The data suggests steady growth in asset size alongside improving efficiency in asset utilization as indicated by increasing ROA percentages. The stronger adjusted ROA figures point to a higher underlying operating performance once intangible goodwill assets are removed from the equation. The temporary dip in adjusted total assets in 2022 may warrant further investigation but does not appear to have adversely impacted overall profitability trends.