FedEx vs. UPS: Which Shipping Giant Is the Better Long-Term Buy?

$United Parcel Service Inc(UPS)$ $FedEx(FDX)$

If you're anything like me, you're probably viewing the current stock market volatility not as a reason to panic, but as an opportunity. It's during uncertain times like these when patient investors can find high-quality businesses trading at attractive valuations—essentially, buying dollar bills for fifty or sixty cents. In today’s article, I’m going to walk you through a head-to-head comparison between two of the biggest names in the shipping and logistics space: FedEx and UPS.

We'll break it down across several critical financial and operational metrics, including revenue growth, cash flow from operations, return on invested capital, and fixed asset turnover. Then we’ll turn our attention to valuation, using two lenses: the forward price-to-earnings (P/E) ratio and my own proprietary discounted cash flow (DCF) model to determine each company's intrinsic value. By the end of this analysis, I’ll give you my take on which of these two stocks I’d rather buy today—and why.

We'll break this down across five essential categories:

1. Revenue Growth

2. Cash Flow from Operations

3. Return on Invested Capital

4. Fixed Asset Turnover

5. Valuation (Forward P/E & Discounted Cash Flow)

Revenue Growth: A Highly Correlated Performance

Let’s start with the most obvious place—revenue growth. When I pulled the data for both companies over the past five years, the first thing that stood out was how closely their revenue trends tracked each other. You can see it clearly in the charts—when one company experienced revenue acceleration, the other did too. When one saw a decline, the other followed suit.

That correlation isn’t just coincidence—it’s a reflection of how similar these businesses are in terms of industry exposure. Both operate at the heart of global commerce. They’re impacted by the same macroeconomic trends: consumer spending, e-commerce volumes, fuel prices, labor dynamics, and supply chain disruptions.

For example, during the early stages of the pandemic in 2020, both companies saw significant revenue growth as online shopping surged and demand for home delivery services skyrocketed. Then in 2021 and 2022, as the world reopened and consumers shifted spending back to in-person experiences, that growth decelerated.

However, starting in 2023, we saw a modest rebound in e-commerce activity and online spending habits—leading both UPS and FedEx to post positive revenue growth once again after several quarters of declines.

When you chart out revenue growth for FedEx and UPS over the past five years, a striking trend emerges—they move nearly in lockstep. This isn’t surprising. Both companies operate in the same industry, are exposed to the same global economic trends, and respond similarly to macro events.

• 2020: Both companies saw a surge in revenue as the pandemic drove e-commerce volumes to historic highs.

• 2021–2022: Revenue growth slowed as physical retail rebounded and global shipping normalized.

• 2023 onward: Online spending saw a mild resurgence, helping both firms recover from earlier declines.

Bottom line: These businesses are highly correlated in top-line performance, meaning stock selection comes down to efficiency, execution, and valuation.

Cash Flow from Operations to Sales: UPS Pulls Ahead

This metric tells you how much real, usable cash a company is generating from every dollar of sales. Over the trailing 12 months:

• UPS: Operating cash flow/sales ratio = 11%

• FedEx: Operating cash flow/sales ratio = 8%

More importantly, UPS has consistently outperformed FedEx on this front over the past five years. This speaks to stronger operations, tighter cost control, and better management execution.

Advantage: UPS

Tariffs: A Wildcard Risk for Logistics Giants

Before we move on, it’s worth touching on tariffs—because any company involved in the movement of goods across borders will feel the effects of trade policy changes. When a tariff is placed on imported goods, it increases the cost of those goods by a certain percentage—say, 10% or 20%.

That cost is initially borne by the business doing the importing. But then, they have a decision to make:

1. Do they absorb the additional cost and take a hit to margins?

2. Or do they pass it on to the end consumer through higher prices?

In most cases, it’s a hybrid—some cost is absorbed, and some is passed on. But the end result is clear: prices rise. And when prices rise, demand usually falls—a fundamental principle from basic economics. So even though UPS and FedEx aren’t the ones paying the tariffs directly, they are impacted indirectly through lower shipping volumes and reduced customer demand.

It’s a risk worth keeping in mind, especially if global trade tensions continue to simmer.

Cash Flow from Operations to Sales: A Clear Leader Emerges

Let’s shift to profitability and operational efficiency—starting with cash flow from operations as a percentage of sales. This is one of my favorite metrics because it tells you how well a company is turning its top-line revenue into actual cash that can be reinvested in the business, used to pay down debt, or returned to shareholders.

Over the trailing 12-month period, UPS came in at 11%, compared to 8% for FedEx. And when I zoomed out over the past five years, this wasn’t a one-time occurrence. UPS has consistently outperformed FedEx on this metric. That kind of consistency is critical when you’re evaluating long-term investments. You want a company that not only grows but also converts that growth into real, usable capital.

Return on Invested Capital (ROIC): Efficiency in Action

Next, I looked at return on invested capital, or ROIC—a measure of how efficiently a company is using its capital to generate profits. It’s one of the most telling indicators of business quality. A company with a high and sustained ROIC usually has a strong competitive advantage, or economic moat.

In this case, UPS again outperformed, delivering a 15% ROIC versus FedEx’s 8% in the most recent period. Aside from a brief window in 2021 when FedEx pulled ahead, UPS has had the upper hand in almost every year. That’s a big deal. ROIC is what separates good businesses from great ones, and it’s no coincidence that UPS consistently posts stronger numbers here.

With the exception of a brief period in 2021, UPS has consistently outperformed FedEx. A sustained ROIC in the mid-teens is a strong signal that UPS has operational advantages—whether it’s better route planning, labor efficiency, or asset utilization.

Advantage: UPS

Fixed Asset Turnover: Getting the Most from Capital Investments

These are capital-intensive businesses. Trucks, planes, warehouses—these aren’t cheap, and both companies have to invest billions into their infrastructure. So it’s important to look at fixed asset turnover, which measures how efficiently a company generates revenue from its fixed assets.

Once again, UPS outperforms FedEx. This suggests that UPS is better at sweating its assets—getting more revenue from the same or similar capital base. In other words, it’s using its resources more effectively, which often translates into better margins and stronger long-term returns.

Fixed Asset Turnover: Capital Efficiency

Both FedEx and UPS operate in a capital-intensive industry. Trucks, cargo planes, warehouses—these require billions in upfront investment. That’s why fixed asset turnover, or how well a company uses its capital to generate revenue, matters.

Once again, UPS leads the way here. It generates more revenue per dollar of fixed assets, signaling greater efficiency and higher ROI potential for long-term investors.

Advantage: UPS

Valuation: Forward P/E and Intrinsic Value

Now, let’s talk valuation. Based on forward price-to-earnings ratios, UPS is currently trading at 12x forward earnings, while FedEx is slightly cheaper at around 11–12x forward earnings. On the surface, that makes them look pretty similar.

But forward P/E doesn’t tell the full story, so I built out a discounted cash flow (DCF) model for each company to estimate their intrinsic value.

• For UPS, I calculated a fair value of $147 per share, while the market price is currently around $109. That gives us a decent margin of safety and suggests that UPS is undervalued.

• For FedEx, my DCF model yielded a fair value of $219, but the stock is trading at $240—meaning it’s likely fairly valued or slightly overvalued at current levels.

This is where things get interesting: even though UPS is operationally stronger, it’s also trading at a discount to its intrinsic value, while FedEx appears fully priced in.

Advantage: UPS

Final Verdict: UPS Wins on Fundamentals and Valuation

Across four key performance metrics—revenue growth, cash flow from operations, ROIC, and fixed asset turnover—UPS comes out ahead in three out of four. Not only that, but it’s trading at a similar valuation to FedEx on a forward P/E basis, while also appearing undervalued based on intrinsic value.

So if I had to choose between the two stocks today—strictly from a long-term investment standpoint—the choice is clear: I’d buy UPS.

It’s the better-performing business, it’s more efficient with capital, and it’s currently trading below its estimated fair value. That’s the kind of setup I look for as a cyclical investor—solid fundamentals with a valuation edge.

Do you own shares in FedEx or UPS? Are you bullish on the logistics sector long-term? Let me know in the comments or shoot me a message.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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