FedEx shares fell by -14.0% during the day's afternoon session, and are now trading at a price of $258.31. 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 Lower P/B Ratio Than Its Sector Average but Priced Beyond Its Margin of Safety:
FedEx Corporation, together with its subsidiaries, 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 22.15 and an average price to book (P/B) ratio of 3.11. In contrast, FedEx has a trailing 12 month P/E ratio of 16.0 and a P/B ratio of 2.32.
When we divideFedEx's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.96, 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.
The Firm Has a Highly Leveraged Balance Sheet:
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $65,450 | $69,693 | $69,217 | $83,959 | $93,512 | $90,155 |
| Operating Margins | 7% | 6% | 3% | 7% | 7% | 5% |
| Net Margins | 7% | 1% | 2% | 6% | 4% | 4% |
| Net Income (M) | $4,572 | $540 | $1,286 | $5,231 | $3,826 | $3,972 |
| Net Interest Expense (M) | -$510 | -$529 | $672 | $793 | $689 | $694 |
| Depreciation & Amort. (M) | $3,095 | $3,353 | $3,615 | $3,793 | $3,970 | $4,176 |
| Diluted Shares (M) | 266 | 262 | 269 | 268 | 256 | 253 |
| 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% |
| Avg. Price | $202.55 | $220.07 | $155.83 | $177.64 | $256.46 | $217.96 |
| P/E Ratio | 11.86 | 106.83 | 31.67 | 8.98 | 17.64 | 13.97 |
| Free Cash Flow (M) | -$989 | $123 | -$771 | $4,251 | $3,069 | $2,674 |
| CAPEX (M) | $5,663 | $5,490 | $5,868 | $5,884 | $6,763 | $6,174 |
| EV / EBITDA | 11.32 | 11.6 | 12.87 | 8.47 | 10.01 | 9.76 |
| Total Debt (M) | $31,642 | $35,308 | $45,173 | $41,119 | $40,258 | $40,646 |
| Net Debt / EBITDA | 4.01 | 4.26 | 6.11 | 3.55 | 3.49 | 3.73 |
| Current Ratio | 1.42 | 1.25 | 1.76 | 1.49 | 1.3 | 1.34 |
