United Rentals Inc (URI, Financial) has experienced a slight daily loss of -1.91%, yet it has managed a 3-month gain of 4.75%. With an impressive Earnings Per Share (EPS) of 34.49, investors may wonder if the stock is fairly valued. This article aims to explore United Rentals' valuation, encouraging readers to delve into the following analysis to uncover the answer.
Company Introduction
United Rentals is the world's largest equipment rental company, with a dominant presence in the United States and Canada. Since its public debut in 1997, United Rentals has expanded its fleet to a staggering $21 billion worth of equipment, catering to a diverse range of industries. The company's stock price currently stands at $471.8, with a market cap of $32 billion. Comparing this to the Fair Value (GF Value) of $494.3, we're presented with a unique opportunity to assess whether United Rentals is trading at its intrinsic value.
Summarizing the GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. It is computed by considering historical trading multiples, an adjustment factor based on the company's past performance, and future business performance estimates. United Rentals (URI, Financial) appears to be fairly valued according to the GF Value Line. This suggests that the stock is priced closely to its fair value, indicating that the long-term return of its stock is likely to align with the rate of its business growth.
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Financial Strength
Investing in companies with solid financial strength is crucial to avoid the risk of capital loss. United Rentals' cash-to-debt ratio of 0.02 ranks lower than the majority of its industry peers, leading to a financial strength rating of 4 out of 10 by GuruFocus. This suggests a relatively weak balance sheet that investors should consider in their analysis.
Profitability and Growth
United Rentals has demonstrated remarkable profitability, maintaining profits for the last decade. With an operating margin of 27.42%, it outperforms 91.95% of its industry counterparts. Additionally, the company's growth has been commendable, with an average annual revenue increase of 10.9%, surpassing 68.87% of businesses in the Business Services sector. These figures highlight United Rentals' strong market position and potential for continued expansion.
ROIC vs. WACC
An essential aspect of assessing a company's profitability is comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). United Rentals' ROIC of 12.61% stands above its WACC of 11.88%, indicating that the company is generating sufficient returns on its investments. This is a positive sign for investors, as it suggests efficient capital management and promising shareholder value creation.
Conclusion
In conclusion, United Rentals (URI, Financial) appears to be fairly valued, with a strong profitability profile and growth potential that outstrips over half of its industry rivals. However, its financial condition raises some concerns that should be taken into account. For a deeper understanding of United Rentals' financial health, investors are encouraged to review 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.
