United Rentals Inc (URI, Financial) has recently experienced a daily gain of 4.46%, with a subtle 3-month gain of 0.62%. With an impressive Earnings Per Share (EPS) of $34.49, investors may wonder if the stock is Fairly Valued. This article delves into the valuation analysis of United Rentals, providing readers with an in-depth look at the company's financial standing and market position.
Company Introduction
United Rentals is the world's largest equipment rental company, holding a commanding 17% market share in the United States and Canada. Since its public inception in 1997, the company has expanded its fleet size to $21 billion through organic growth and hundreds of acquisitions. United Rentals serves a diverse range of markets, including general industrial, commercial construction, and residential construction. The current stock price of United Rentals stands at $476.22, hovering near the Fair Value (GF Value) of $496.09. This close proximity suggests a fair valuation, but let's explore further to understand the true worth of URI shares.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on the company's past performance, and projected future business outcomes. According to this measure, United Rentals (URI, Financial) is considered fairly valued. The GF Value suggests that the stock's long-term return should align closely with the company's business growth rate. Let's examine the GF Value chart to visualize this assessment.
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Financial Strength
Assessing a company's financial strength is crucial to avoid the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage can provide insights into this area. United Rentals' cash-to-debt ratio is 0.02, ranking lower than 96.72% of peers in the Business Services industry. This results in a financial strength rating of 4 out of 10, indicating that United Rentals' financial health could be better.
Profitability and Growth
Investing in profitable companies, particularly those with a consistent track record, is generally less risky. United Rentals has maintained profitability for the last decade. The company's operating margin of 27.42% ranks highly, placing it in a better position than 91.58% of companies in the Business Services industry. With strong profitability ranked at 10 out of 10, United Rentals demonstrates robust financial health.
Growth is another pivotal factor in company valuation. United Rentals' average annual revenue growth of 10.9% outpaces 68.8% of competitors in the Business Services sector. The company's 3-year average EBITDA growth rate is 12.5%, indicating solid growth prospects.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) offers a glimpse into a company's profitability relative to its invested capital. United Rentals' ROIC of 12.61% over the past year is higher than its WACC of 11.8%, suggesting that the company is creating value for its shareholders.
Conclusion
In conclusion, United Rentals (URI, Financial) appears to be fairly valued at its current price. Despite its less than optimal financial strength, the company's profitability is impressive, and its growth trajectory ranks well within its industry. For those interested in a deeper financial analysis, United Rentals' 30-Year Financials are available here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
