FedEx Corp (FDX, Financial) experienced a daily gain of 2.8% and a 3-month loss of -3.23%. With an Earnings Per Share (EPS) of 16.4, the question remains: Is the stock fairly valued? This article aims to provide a comprehensive valuation analysis of FedEx (FDX) to answer this question. Stay tuned as we delve deeper into the financial metrics and intrinsic value of FedEx.
Company Overview
FedEx pioneered overnight delivery in 1973 and has since grown to become the world's largest express package provider. In its fiscal 2023, FedEx derived 47% of revenue from its express division, 37% from ground, and 11% from freight. The remainder comes from other services, including FedEx Office and FedEx Logistics. Comparing the stock price of $249.64 to the GF Value of $250.79, FedEx (FDX, Financial) appears to be fairly valued.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
FedEx (FDX, Financial) appears to be fairly valued based on GuruFocus' valuation method. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. As FedEx is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. FedEx has a cash-to-debt ratio of 0.19, which ranks worse than 72.03% of 944 companies in the Transportation industry. The overall financial strength of FedEx is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. FedEx has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $88.60 billion and Earnings Per Share (EPS) of $16.4. Its operating margin of 6.43% is worse than 56.81% of 954 companies in the Transportation industry. Overall, GuruFocus ranks FedEx's profitability as strong.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of FedEx is 10.1%, which ranks better than 62.01% of 916 companies in the Transportation industry. The 3-year average EBITDA growth rate is 20.7%, which ranks better than 66.55% of 822 companies in the Transportation industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, FedEx's ROIC was 5.98, while its WACC came in at 7.98.
Conclusion
In conclusion, the stock of FedEx (FDX, Financial) shows every sign of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 66.55% of 822 companies in the Transportation industry. To learn more about FedEx stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
