Time To Buy FedEx Stock At $240?

Core Viewpoint - FedEx stock is trending higher following positive quarterly results and a favorable sales outlook, despite facing significant pressure earlier in the year due to elevated operating costs [2] Valuation Comparison - FedEx's price-to-sales (P/S) ratio is 0.6 compared to 3.2 for the S&P 500, indicating it is undervalued relative to the broader market [6] - The price-to-free cash flow (P/FCF) ratio for FedEx is 15 versus 21.1 for the S&P 500, and the price-to-earnings (P/E) ratio is 14 compared to 24 for the benchmark [6] Revenue Growth - FedEx's revenues have declined at an average rate of 2.2% over the last three years, while the S&P 500 has seen an increase of 5.3% [6] - In the last 12 months, FedEx's revenues grew by 1% from $88 billion to $89.6 billion, compared to a 5.1% growth for the S&P 500 [6] - Quarterly revenues increased by 2.8% to $22 billion in the most recent quarter from $22 billion a year ago, while the S&P 500 experienced a 6.1% improvement [6] Profitability Analysis - FedEx's operating income over the last four quarters was $6.0 billion, resulting in an operating margin of 6.7%, significantly lower than the S&P 500's 18.6% [11] - The operating cash flow (OCF) for FedEx was $7.6 billion, yielding an OCF margin of 8.5% compared to 20.3% for the S&P 500 [11] - FedEx's net income was $4.1 billion, indicating a net income margin of 4.7%, again lower than the S&P 500's 12.6% [11] Financial Stability - FedEx's debt stood at $38 billion with a market capitalization of $54 billion, resulting in a debt-to-equity ratio of 67%, higher than the S&P 500's 20.9% [11] - Cash and cash equivalents amount to $6.2 billion out of $88 billion in total assets, leading to a cash-to-assets ratio of 7.0%, which is on par with the S&P 500 [11] Stock Performance During Downturns - FDX stock has underperformed compared to the S&P 500 during recent downturns, with a peak-to-trough decline of 54.7% from May 2021 to September 2022, compared to 25.4% for the S&P 500 [11] - The stock has not yet recovered to its pre-crisis high, with the highest price since then being $313.52 in July 2024, currently trading around $225 [11] Overall Assessment - FedEx's recent performance has been weak across key metrics, but its low valuation suggests that this is already reflected in the stock price [10] - The company is valued at 14 times trailing earnings, slightly below its five-year average of 15 times, with potential for growth as revenue increases and management focuses on margin improvement [10]