In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)
Weighted Average Cost of Capital (WACC)
FCFF Growth Rate (g)

Cintas Corp., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Year	Value	FCFF_t or Terminal value (TV_t)	Calculation	Present value at 16.07%
0¹	FCFF₀	1,750,579
1	FCFF₁	1,975,362	= 1,750,579 × (1 + 12.84%)	1,701,838
2	FCFF₂	2,233,031	= 1,975,362 × (1 + 13.04%)	1,657,441
3	FCFF₃	2,528,858	= 2,233,031 × (1 + 13.25%)	1,617,110
4	FCFF₄	2,869,027	= 2,528,858 × (1 + 13.45%)	1,580,597
5	FCFF₅	3,260,797	= 2,869,027 × (1 + 13.66%)	1,547,683
5	Terminal value (TV₅)	153,327,218	= 3,260,797 × (1 + 13.66%) ÷ (16.07% – 13.66%)	72,774,222
Intrinsic value of Cintas Corp. capital				80,878,891
Less: Debt (fair value)				2,392,800
Intrinsic value of Cintas Corp. common stock				78,486,091

Intrinsic value of Cintas Corp. common stock (per share)				$194.49
Current share price				$198.05

Based on: 10-K (reporting date: 2024-05-31).

¹ See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Cintas Corp., cost of capital

	Value¹	Weight	Required rate of return²	Calculation
Equity (fair value)	79,921,876	0.97	16.46%
Debt (fair value)	2,392,800	0.03	3.27%	= 4.00% × (1 – 18.19%)

Based on: 10-K (reporting date: 2024-05-31).

¹ US$ in thousands

Equity (fair value) = No. shares of common stock outstanding × Current share price
= 403,543,932 × $198.05
= $79,921,875,732.60

Debt (fair value). See details »

² Required rate of return on equity is estimated by using CAPM. See details »

Required rate of return on debt. See details »

Required rate of return on debt is after tax.

Estimated (average) effective income tax rate
= (20.37% + 20.38% + 17.55% + 13.73% + 17.19% + 19.94%) ÷ 6
= 18.19%

WACC = 16.07%

FCFF growth rate (g) implied by PRAT model

Cintas Corp., PRAT model

	Average	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019
Selected Financial Data (US$ in thousands)
Interest expense		100,740)	111,232)	88,844)	98,210)	105,393)	101,736)
Income (loss) from discontinued operations, net of tax		—)	—)	—)	—)	(323)	2,346)
Net income		1,571,592)	1,348,010)	1,235,757)	1,110,968)	876,037)	884,981)

Effective income tax rate (EITR)¹		20.37%	20.38%	17.55%	13.73%	17.19%	19.94%

Interest expense, after tax²		80,219)	88,563)	73,252)	84,726)	87,276)	81,450)
Add: Dividends		550,952)	469,858)	393,609)	530,462)	267,956)	220,764)
Interest expense (after tax) and dividends		631,171)	558,421)	466,861)	615,188)	355,232)	302,214)

EBIT(1 – EITR)³		1,651,811)	1,436,573)	1,309,009)	1,195,694)	963,636)	964,085)

Debt due within one year		449,595)	—)	311,574)	899,070)	—)	312,264)
Debt due after one year		2,025,934)	2,486,405)	2,483,932)	1,642,833)	2,539,705)	2,537,507)
Shareholders’ equity		4,316,372)	3,863,986)	3,308,196)	3,687,847)	3,235,202)	3,002,721)
Total capital		6,791,901)	6,350,391)	6,103,702)	6,229,750)	5,774,907)	5,852,492)
Financial Ratios
Retention rate (RR)⁴		0.62	0.61	0.64	0.49	0.63	0.69
Return on invested capital (ROIC)⁵		24.32%	22.62%	21.45%	19.19%	16.69%	16.47%
Averages
RR	0.64
ROIC	20.12%

FCFF growth rate (g)⁶	12.84%

Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).

¹ See details »

2024 Calculations

² Interest expense, after tax = Interest expense × (1 – EITR)
= 100,740 × (1 – 20.37%)
= 80,219

³ EBIT(1 – EITR) = Net income – Income (loss) from discontinued operations, net of tax + Interest expense, after tax
= 1,571,592 – 0 + 80,219
= 1,651,811

⁴ RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,651,811 – 631,171] ÷ 1,651,811
= 0.62

⁵ ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,651,811 ÷ 6,791,901
= 24.32%

⁶ g = RR × ROIC
= 0.64 × 20.12%
= 12.84%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value₀ × WACC – FCFF₀) ÷ (Total capital, fair value₀ + FCFF₀)
= 100 × (82,314,676 × 16.07% – 1,750,579) ÷ (82,314,676 + 1,750,579)
= 13.66%

where:

Total capital, fair value₀ = current fair value of Cintas Corp. debt and equity (US$ in thousands)
FCFF₀ = the last year Cintas Corp. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Cintas Corp. capital

FCFF growth rate (g) forecast

Cintas Corp., H-model

Year	Value	g_t
1	g₁	12.84%
2	g₂	13.04%
3	g₃	13.25%
4	g₄	13.45%
5 and thereafter	g₅	13.66%

where:
g₁ is implied by PRAT model
g₅ is implied by single-stage model
g₂, g₃ and g₄ are calculated using linear interpoltion between g₁ and g₅

Calculations

g₂ = g₁ + (g₅ – g₁) × (2 – 1) ÷ (5 – 1)
= 12.84% + (13.66% – 12.84%) × (2 – 1) ÷ (5 – 1)
= 13.04%

g₃ = g₁ + (g₅ – g₁) × (3 – 1) ÷ (5 – 1)
= 12.84% + (13.66% – 12.84%) × (3 – 1) ÷ (5 – 1)
= 13.25%

g₄ = g₁ + (g₅ – g₁) × (4 – 1) ÷ (5 – 1)
= 12.84% + (13.66% – 12.84%) × (4 – 1) ÷ (5 – 1)
= 13.45%

Cintas Corp. (NASDAQ:CTAS)

Present Value of Free Cash Flow to the Firm (FCFF)

Intrinsic Stock Value (Valuation Summary)

Weighted Average Cost of Capital (WACC)

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

FCFF growth rate (g) implied by single-stage model

FCFF growth rate (g) forecast