Hertz Global Holdings (HTZ, Financial) experienced notable stock movement today. The stock price increased by 9.94%, reaching $3.71. This significant fluctuation followed the company's third-quarter earnings report, which initially led to a drop due to disappointing results.
Hertz reported a 5% decline in revenue to $2.58 billion, missing the anticipated $2.7 billion target. The company also announced a $1 billion impairment charge, stemming from lower fleet residual values associated with overinvestment in electric vehicles (EVs) with poor resale values, alongside earlier purchases of gas-powered vehicles at higher prices amid supply shortages.
Despite these setbacks, Hertz's valuation remains compelling for some investors. The stock's price-to-sales ratio stands at a mere 0.1, pointing to a relatively low valuation. This presents a potential opportunity for those who believe the company’s transformation efforts will eventually bear fruit.
However, when examining Hertz's financials, several warning signs emerge. The company's financial strength is rated as "Poor," with a distressing Altman Z-score of 0.35, suggesting a potential bankruptcy risk within the next two years. The company's debt levels are also concerning, as evidenced by a debt-to-equity ratio of 9.95 and a cash-to-debt ratio of only 0.03.
Hertz's profitability metrics are in the negative territory, with a return on equity (ROE) of -25.79% and a return on assets (ROA) of -3.06%. As a result, the stock might appear risky to conservative investors focusing on financial health and profitability.
While the company is undergoing a transformation, including plans to sell 30,000 EVs by year-end and completing a fleet refresh by the end of 2025, these efforts require careful execution amid financial challenges.
Evaluating Hertz's current situation, the stock could be considered a "Possible Value Trap" according to its GF Value assessment. Investors should think twice and conduct thorough due diligence before making investment decisions. For more insights into Hertz's valuation, you can refer to the GF Value page.
