Some investors believe that it's best not to overthink things or rely too much on cold numbers. Instead, they believe in buying into brands, business models and growth stories, with the idea being that the numbers eventually work themselves out. Much as it goes against my strong stock fundamentalist instincts, I can see a point here with a stock like FedEx (NYSE:FDX). Clearly, this company's brand and enormous global logistics infrastructure is worth quite a lot. Yet, the company's past returns on capital and free cash flow margin would suggest that today's apparently low valuation metrics deserve to be even lower still. (For related reading on free cash flow, see Free Cash Flow: Free, But Not Always Easy.)
An Encouraging Second Quarter
FedEx showed meaningful progress on numerous fronts in its fiscal second quarter. Overall, revenue rose about 10% and this growth was well-balanced across the units. The very large Express business, which accounts for more than 60% of total revenue, saw growth of 10%, while the smaller Ground and Freight businesses grew 13 and 9%, respectively.
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