United Parcel Service shares fell by -2.9% during the day's evening session, and are now trading at a price of $156.96. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
A Very Low P/E Ratio but Trades Above Its Graham Number:
United Parcel Service, Inc., a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, United Parcel Service has a trailing 12 month P/E ratio of 15.9 and a P/B ratio of 6.98.
When we divide United Parcel Service's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -3.86. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Overview of the Company's Finances:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $71,861 | $74,094 | $84,628 | $97,287 | $100,338 | $93,074 |
| Revenue Growth | n/a | 3.11% | 14.22% | 14.96% | 3.14% | -7.24% |
| Operating Margins | 10% | 11% | 9% | 17% | 15% | 12% |
| Net Margins | 7% | 6% | 2% | 13% | 12% | 9% |
| Net Income (MM) | $4,791 | $4,440 | $1,343 | $12,890 | $11,548 | $8,556 |
| Net Interest Expense (MM) | $605 | $653 | $701 | $3,785 | $1,731 | $1,118 |
| Depreciation & Amort. (MM) | $2,207 | $2,360 | $2,698 | $2,953 | $3,188 | $3,387 |
| Earnings Per Share | $5.51 | $5.11 | $1.54 | $14.68 | $13.2 | $9.88 |
| EPS Growth | n/a | -7.26% | -69.86% | 853.25% | -10.08% | -25.15% |
| Diluted Shares (MM) | 870 | 869 | 871 | 878 | 875 | 832 |
| Free Cash Flow (MM) | $6,428 | $2,259 | $5,047 | $10,813 | $9,335 | $5,559 |
| Capital Expenditures (MM) | $6,283 | $6,380 | $5,412 | $4,194 | $4,769 | $5,600 |
| Current Ratio | 1.15 | 1.11 | 1.19 | 1.42 | 1.22 | 1.22 |
| Total Debt (MM) | $28,763 | $30,901 | $32,440 | $27,264 | $23,947 | $25,847 |
| Net Debt / EBITDA | 2.66 | 2.53 | 2.56 | 0.87 | 1.02 | 1.5 |
United Parcel Service benefits from growing revenues and decreasing reinvestment in the business, decent operating margins with a stable trend, and a strong EPS growth trend. The company's financial statements show irregular cash flows and healthy leverage.
