A More Grounded Valuation: FedEx Corporation

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Steady growth with leveraged balance sheet

FedEx, $63 billion business services company, recently experienced a 14% drop in its market price from its peak and now at $235.32/share.

In its six months that ended in November 2017, FedEx reported 6.8% rise in revenue and -3.1% drop in profits compared to its year ago period. FedEx also had $15 billion in borrowings (0.9x debt-equity) with $17 billion in book value.

“Strategic execution by the FedEx team and a stronger global economy drove
improved financial results, and we are well positioned for profitable, long-term
growth.

“We are on track for another record holiday-shipping season, and
customer-service levels have been outstanding. We thank our more than
400,000 dedicated team members around the world for their extraordinary
dedication.”

Frederick W. Smith, FedEx Corp. chairman and chief executive officer

In the past three fiscal years, FedEx raised $5.5 billion and accumulated $1.7 billion in free cash flow.

At nearly 4x price-book multiple, FedEx definitely traded at far less premium compared to its counterpart, UPS.

Analysts have an average price target of $286.76/share vs. $236 at the time of writing. Using historical growth and multiple averages indicated a per share figure of $258.

Disclosure: No shares in FedEx.

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