Uniform Makers Dressed for Success -- Barron's

Includes: CTAS, GK, UNF
by: Susan Lerner

A weak jobs market has taken a toll on providers of uniforms for civilian workers such as waiters and doormen, but Barron's says long-term prospects for the group are good amid projections their ranks could grow by some 1M annually. While uniform providers make their money mainly through rentals, laundry and repair, some have branched out to provide other items needed by those businesses such as fire extinguishers, welcome mats and document shredders -- something one money manager called a big plus. Despite threatening factors such as soft employment, Barron's says investors should focus on their "financial health, defensive characteristics and reasonable valuations" as the three leading providers -- Cintas, G&K and Unifirst -- all trade at 14-18x '08 earnings estimates vs. 15x for the S&P 500 but have better growth prospects. All three have good cash flow, Barron's notes, with Cintas generating $2.96 this year and one analyst seeing limited downside given a substantial repurchase program. G&K has used its cash to pay down debt, while greater efficiencies are leading to earnings growth. UniFirst has used its cash to expand, making more than 50 acquisitions since 2001.

Sources: Barron's
Commentary: Cintas: Rising Earnings, Falling Multiple, Flat StockThe Jobs Report: 'Never Mind'
Stocks/ETFs to watch: GKSR, CTAS, UNF
Earnings call transcript: Cintas F4Q07

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