United Rentals Inc (URI, Financial) has been experiencing a notable daily gain of 5.45%, with a 3-month gain of 6.05%. Despite these positive trends, a key question arises: is the stock significantly overvalued? With an impressive Earnings Per Share (EPS) of 36.89, investors are keen to understand the true value of United Rentals (URI). This article aims to delve into the valuation analysis of United Rentals, providing readers with a clear perspective on whether its current market price reflects its fair value.
Company Introduction
United Rentals is the world's largest equipment rental company, with a commanding 17% market share in a highly fragmented industry across the United States and Canada. Since its public debut in 1997, the company has expanded its fleet to a staggering $21 billion, serving general industrial, commercial construction, and residential construction markets. With a current stock price of $690.92 and a market cap of $46.40 billion, the comparison between United Rentals' market price and the GF Value—an estimation of its fair value—is critical to understanding its valuation status.
Summarize GF Value
The GF Value is a proprietary measure that reflects a stock's intrinsic value, indicating the fair trading value for United Rentals. This measure is based on historical trading multiples, the GuruFocus adjustment factor, and estimated future business performance. If United Rentals' stock price significantly exceeds the GF Value, it suggests an overvalued status and potentially poorer future returns. Conversely, a price below the GF Value could imply higher future returns. At its current price, United Rentals (URI, Financial) appears to be significantly overvalued, with a GF Value of $526.41, suggesting caution for long-term investors.
Financial Strength
Investing in companies with robust financial strength is essential to mitigate the risk of permanent capital loss. United Rentals' cash-to-debt ratio of 0.03 is lower than 94.74% of its peers in the Business Services industry, indicating a need for careful consideration of its financial health. The company's financial strength is rated at 5 out of 10 by GuruFocus, placing it in a fair position regarding its financial stability.
Profitability and Growth
United Rentals has demonstrated consistent profitability over the past decade, with high profit margins indicating a safer investment compared to companies with lower margins. With a revenue of $14.50 billion and an operating margin of 26.9%, United Rentals stands out in the Business Services industry. Its profitability rank of 10 out of 10 signifies robust profitability. Furthermore, the company's growth has been impressive, with a 3-year average annual revenue growth of 21.3%, outperforming 81.37% of its industry peers. The EBITDA growth rate of 22.8% also surpasses 68.21% of the competition, showcasing United Rentals' strong growth trajectory.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is a vital measure of a company's profitability. United Rentals' ROIC of 12.3 is just below its WACC of 12.48, indicating a narrow margin for creating shareholder value. This comparison is crucial for investors to gauge the efficiency of capital usage within the company.
Conclusion
In summary, United Rentals (URI, Financial) exhibits signs of being significantly overvalued. The company maintains fair financial health and strong profitability, with growth rates that are competitive within the Business Services industry. To gain a deeper understanding of United Rentals' financials, interested parties can explore its 30-Year Financials 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.
