UPS Stock Analysis: Quality Dividend with Discounted Price?

UPS (United Parcel Service) stock trades in the S&P 500 and is a massive dividend payer with a yield of 6.80%. With a P/E of 14.27 and Forward P/E of 11.43, the stock appears undervalued for its sector, especially given its consistent profitability and strong ROE (33.99%). However, it is currently in a long-term downtrend, with a 23.53% YTD decline, raising caution flags for momentum traders.

Fundamental Analysis

Valuation Metrics

• P/E Ratio: 14.27 (Reasonably priced)

• Forward P/E: 11.43 (Discounted on future earnings)

• PEG Ratio: 2.58 (Growth may be slowing relative to valuation)

• P/S Ratio: 0.90 (Attractive)

• P/B Ratio: 4.93 (Slightly high but acceptable for stable large caps)

📌 Key Takeaway: This stock is fairly to slightly undervalued, especially when future growth is considered.

Profitability & Growth

• Gross Margin: 18.04%

• Operating Margin: 9.60%

• Profit Margin: 6.36%

• EPS Growth Next Y: 11.96%

• EPS Growth Past 5Y: 5.76%

📌 Key Takeaway: Profitability is solid. ROE of 33.99% shows management efficiency, and growth is moderate.

Dividend & Payout

• Dividend Yield: 6.80%

• Payout Ratio: 96.41% (Very high – close to unsustainable)

• P/FCF: 13.16 (Good cash flow support)

📌 Key Takeaway: Dividend is generous but payout is tight, relying heavily on consistent earnings.

Financial Strength

• Current Ratio: 1.17 (Okay, but not great)

• Debt/Equity Ratio: 1.53 (High, but common in large dividend payers)

📌 Key Takeaway: Debt is elevated, but not uncommon for large dividend-focused companies.

Technical Analysis

Trend & Momentum

• SMA 20: -6.67%

• SMA 50: -13.47%

• SMA 200: -23.31%

• RSI (14): 36.41 (Near oversold)

• Beta: 1.23 (Moderate volatility)

📌 Key Takeaway: Downtrend continues, but it is near oversold levels and may present an entry opportunity for long-term holders.

Support & Resistance

• 52-Week Range: $90.55 - $153.42

• Current Price: $96.43

• Support: $90 - $92 (Strong demand zone)

• Resistance: $110, $124.76 (Target Price)

📌 Key Takeaway: Nearing major support. If that holds, a bounce is probable.

Trade Setup & Plan

📌 Entry Zone

• Buy Range: $92.00 - $97.00

• Confirmation: Look for RSI bounce or volume surge from support

🎯 Profit Targets

• Target 1: $110.00 (+14%)

• Target 2: $125.00 (Target Price, +29%)

• Target 3: $135.00 (+40%)

🛑 Stop-Loss Strategy

• Conservative Stop: $89.00

• Aggressive Stop: $86.00

💡 Risk-Reward Ratio: ~3:1(Good for long-term investors seeking income + value)

Buy or Avoid?

✅ Why Buy?

• Attractive dividend (6.80%)

• Undervalued (Forward P/E 11.43)

• Strong ROE (33.99%) and consistent earnings

• Stock trading near major support

❌ Risks to Consider

• Stock in long-term downtrend

• High dividend payout ratio (96.41%)

• Moderate institutional outflows