Today we're going to take a closer look at large-cap Consumer Discretionary company FedEx, whose shares are currently trading at $281.36. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, FedEx has a trailing 12 month P/E ratio of 17.2 and a P/B ratio of 2.67.
When we divideFedEx's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.68, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
Growing Revenues With a Flat Capital Expenditure Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $65,450 | $69,693 | $69,217 | $83,959 | $93,512 | $90,155 |
| Revenue Growth | n/a | 6.48% | -0.68% | 21.3% | 11.38% | -3.59% |
| Operating Margins | 7% | 6% | 3% | 8% | 7% | 6% |
| Net Margins | 7% | 1% | 2% | 6% | 4% | 4% |
| Net Income (MM) | $4,572 | $540 | $1,286 | $5,231 | $3,826 | $3,972 |
| Net Interest Expense (MM) | $558 | $588 | $672 | $817 | $689 | $694 |
| Depreciation & Amort. (MM) | $3,095 | $3,353 | $3,615 | $3,793 | $3,970 | $4,176 |
| Earnings Per Share | $16.79 | $2.03 | $4.9 | $19.45 | $14.33 | $15.48 |
| EPS Growth | n/a | -87.91% | 141.38% | 296.94% | -26.32% | 8.03% |
| Diluted Shares (MM) | 272 | 265 | 262 | 268 | 266 | 256 |
| Free Cash Flow (MM) | -$989 | $123 | -$771 | $4,251 | $3,069 | $2,674 |
| Capital Expenditures (MM) | $5,663 | $5,490 | $5,868 | $5,884 | $6,763 | $6,174 |
| Current Ratio | 1.42 | 1.25 | 1.76 | 1.49 | 1.3 | 1.37 |
| Total Debt (MM) | $17,041 | $18,707 | $23,369 | $20,599 | $20,280 | $20,571 |
| Net Debt / EBITDA | 2.0 | 2.13 | 2.49 | 1.32 | 1.53 | 1.42 |
FedEx has growing revenues and a flat capital expenditure trend and decent operating margins with a stable trend. Additionally, the company's financial statements display irregular cash flows and healthy leverage. Furthermore, FedEx has flat EPS growth.
