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An Upgrade for This Leader in Uniform Rental

Although the current stock price is steep, wide-moat Cintas benefits from scale-based cost advantages and strong network infrastructure.


Matthew Young: We recently upgraded our moat rating for Cintas (CTAS) to wide from narrow, following a fresh look at the firm's competitive positioning. For background, Cintas rents and sells corporate identity uniforms and related ancillary services (entrance mats, mops, restroom supplies, and so on) to fairly wide array of end markets (retail, manufacturing, hospitality, gaming, and so forth).

The firm is, by far, the leader in the space with a roughly 25% market share. Why the change to a wide moat rating for Cintas? When you boil it down, we believe the firm's core uniform-rental-services business benefits significantly from scale-based cost advantages that should allow for positive economic profit and ROICs in excess of cost of capital over the long run and very likely throughout the business cycle, as we saw in the 2008-09 downturn.

Matthew Young does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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