United Parcel Service shares fell by -1.8% during the day's morning session, and are now trading at a price of $133.45. 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.
an Increase in Expected Earnings Improves Its Value Outlook but Trading Above Its Fair Price:
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 25.42 and an average price to book (P/B) ratio of 3.2. In contrast, United Parcel Service has a trailing 12 month P/E ratio of 21.8 and a P/B ratio of 6.72.
United Parcel Service's PEG ratio is 6.77, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
A Positive EPS Growth Rate but Slimmer Gross Margins than the Industry Average of 13.75%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $71,861 | $74,094 | $84,628 | $97,287 | $100,338 | $90,958 |
| Gross Margins | 10% | 11% | 9% | 13% | 13% | 10% |
| Net Margins | 7% | 6% | 2% | 13% | 12% | 7% |
| Net Income (M) | $4,791 | $4,440 | $1,343 | $12,890 | $11,548 | $6,708 |
| Net Interest Expense (M) | $605 | $653 | $701 | $694 | $704 | $785 |
| Depreciation & Amort. (M) | $2,207 | $2,360 | $2,698 | $2,953 | $3,188 | $3,366 |
| Diluted Shares (M) | 870 | 869 | 871 | 878 | 875 | 860 |
| Earnings Per Share | $5.51 | $5.11 | $1.54 | $14.68 | $13.2 | $7.8 |
| EPS Growth | n/a | -7.26% | -69.86% | 853.25% | -10.08% | -40.91% |
| Avg. Price | $97.18 | $98.17 | $119.28 | $179.82 | $188.73 | $132.76 |
| P/E Ratio | 17.57 | 19.1 | 76.95 | 12.19 | 14.23 | 17.0 |
| Free Cash Flow (M) | $6,428 | $2,259 | $5,047 | $10,813 | $9,335 | $5,080 |
| CAPEX (M) | $6,283 | $6,380 | $5,412 | $4,194 | $4,769 | $5,158 |
| EV / EBITDA | 11.34 | 10.58 | 11.9 | 10.7 | 11.08 | 10.89 |
| Total Debt (M) | $25,154 | $28,311 | $27,095 | $22,945 | $21,777 | $25,346 |
| Net Debt / EBITDA | 2.27 | 2.27 | 2.04 | 0.81 | 0.99 | 1.77 |
| Current Ratio | 1.15 | 1.11 | 1.19 | 1.42 | 1.22 | 1.1 |
United Parcel Service has growing revenues and decreasing reinvestment in the business, positive cash flows, and just enough current assets to cover current liabilities, as shown by its current ratio of 1.1. We also note that the company benefits from positive EPS growth and healthy leverage levels. However, the firm has slimmer gross margins than its peers.
