What Are the Fundamentals Of UPS?

Over the last year, United Parcel Service logged a 4.6% change, with its stock price reaching a high of $209.39 and a low of $154.87. Over the same period, the stock underperformed the S&P 500 index by -16.0%. As of April 2023, the company's 50-day average price was $177.51. United Parcel Service, Inc., a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. Based in Atlanta, GA, the large-cap Industrials company has 500,000 full time employees. United Parcel Service has offered a 3.5% dividend yield over the last 12 months.

Low Leverage Levels and Exceptional EPS Growth:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $74,094 $84,628 $97,287 $100,338
Gross Margins 10.5% 9.2% 13.2% 13.0%
Operating Margins 10.5% 9.2% 13.2% -73.9%
Net Margins 5.99% 1.69% 13.25% 11.51%
Net Income (MM) $4,440 $1,427 $12,890 $11,548
Net Interest Expense (MM) -653 -701 -694 -704
Net Interest Expense (MM) -$653 -$701 -$694 -$704
Depreciation & Amort. (MM) -$2,360 -$2,698 -$2,953 -$3,188
Earnings Per Share $5.11 $1.64 $14.68 $12.36
EPS Growth n/a -67.91% 795.12% -15.8%
Diluted Shares (MM) 869 871 878 725
Free Cash Flow (MM) $8,639 $5,047 $10,813 $9,335
Capital Expenditures (MM) -$6,380 -$5,412 -$4,194 -$4,769
Net Current Assets (MM) -$37,471 -$41,439 -$30,202 -$29,104
Current Ratio 1.11 1.19 1.42 1.22
Long Term Debt (MM) $21,818 $22,031 $19,784 $17,321
Net Debt / EBITDA 2.37 3.59 0.6 0.78

United Parcel Service has exceptional EPS growth and low leverage. Additionally, the company's financial statements display growing revenues and decreasing reinvestment in the business and consistent free cash flow. However, the firm suffers from slimmer gross margins than its peers and consistently negative margins with a negative growth trend. Finally, we note that United Parcel Service has just enough current assets to cover current liabilities.

A Very Low P/E Ratio but Trades Above Its Graham Number:

United Parcel Service has a trailing twelve month P/E ratio of 14.4, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of $11.83, the company has a forward P/E ratio of 15.0. According to the 18.3% compound average growth rate of United Parcel Service's historical and projected earnings per share, the company's PEG ratio is 0.79. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 10.0%. On this basis, the company's PEG ratio is 1.43. This implies that the shares are fairly valued. In contrast, United Parcel Service is likely overvalued compared to the book value of its equity, since its P/B ratio of 7.69 is higher than the sector average of 3.78. The company's shares are currently trading 169.3% above their Graham number. Ultimately, United Parcel Service's strong cash flows, decent earnings multiple, and healthy debt levels factor towards it being fairly valued, its elevated P/B ratio notwithstanding.

United Parcel Service Has an Average Rating of Buy:

The 27 analysts following United Parcel Service have set target prices ranging from $100.0 to $230.0 per share, for an average of $189.33 with a buy rating. As of April 2023, the company is trading -6.2% away from its average target price, indicating that there is an analyst consensus of some upside potential.

United Parcel Service has a very low short interest because 1.5% of the company's shares are sold short. Institutions own 72.8% of the company's shares, and the insider ownership rate stands at 0.01%, suggesting a small amount of insider investors. The largest shareholder is the Vanguard Group, Inc., whose 9% stake in the company is worth $12,072,191,509.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.