This article is proudly sponsored by the Business Ethics Team at the University of Texas at Austin!
About U-Haul
With respect to the industry in which it operates and simply in its own right, U-Haul is a massive, massive company.
For those who aren’t as immediately familiar with the company and the business it’s engaged in, picking apart the name will do some good. Namely, U haul (pun intended) your stuff around your neighborhood or perhaps even across the United States to its new respective destination, usually, your new residence.
U-Haul is categorized as a do it yourself (DIY) moving company and that is precisely what it does.
Well, technically it’s precisely what you do; you’re just using its services as a helping hand.
On an elementary yet truthful level, the company rents out its equipment, which is typically their different sized trucks as well as trailers, vans along with a few other pieces of supplemental equipment that can aid in bettering the moving process (think packaging equipment, tape, etc..), not to mention its storage capabilities, as moving is typically known as one of the most stressful (not to mention expensive) activities one can undertake.
However, with fairly straight forward pricing and terms along with the company’s widespread presence in both urban and rural communities across the United States, it’s no wonder why U-Haul has the market share and ubiquity it has today.
While the company isn’t as recession proof as some of the other companies we have previously performed stock analysis articles on, at the end of the day, largely irrespective of the state of the economy, when people need to move or transport loads of goods from one place to another, you can bet your bottom dollar that one of the first companies they are to think of is U-Haul.
Additionally, maintaining the market share that it does, the company has most certainly acquired some more than solid pricing power along the way to the top of the industry.
Enough about the company from a general perspective, let’s gain some more familiarity with U-Haul and whether or not its stock is worth considering adding to your precious investment portfolio.
U-Haul’s stock financials
In order to get things started off, U-Haul’s stock is currently trading at a share price of $57.18 with a market capitalization of $10.1 billion, a price-to-earnings (P/E) ratio of 1.42 all while not currently issuing its shareholders an annual dividend.
Although we have seen some very attractive price-to-earnings ratios in the past, this is the lowest we have seen and analyzed thus far.
Namely, it is generally accepted that if a stock has a price-to-earnings ratio of 20, it is trading at exactly fair value or what it is worth paying for today, whereas anything lower indicates that it is trading below fair value, or undervalued.
Given that this is the case, U-Haul’s stock, at least at first glance, appears to be tremendously undervalued which is most certainly a positive for prospective shareholders.
While we’re not exactly sure why the company’s P/E ratio is so low, we’re also not usually ones to complain when it comes to a seemingly quality, huge company trading at as low a price-to-earnings multiple as it is today.
Let’s investigate further and see just how quality this company and its underlying core financials are.
Specifically, according to the company’s balance sheet, U-Haul’s executive team, of which includes an heir of the company’s founders, Joe Shoen, is in charge of managing $17.3 billion in terms of total assets as well as around $11.4 billion in total liabilities.
We are very satisfied with this total asset and total liabilities breakdown, as it highlights the fact that the company is asset-heavy by a more than reasonable margin (therefore it can take on some more debt in order to finance future growth while not worrying about filing for bankruptcy anytime soon as a byproduct of grossly overleveraging) and also has good, prudent financial stewards at the helm that, despite all of the equipment and that it leases out, has found a way to remain total asset-heavy, even during relatively tough economic times.
We tip our hats to you, U-Haul.
Shifting gears over to the company’s income statement, although this is a seasoned company in the rental and moving spaces, U-Haul has also been able to grow its year-over-year total annual revenue since 2018, starting at approximately $3.6 billion and since extending up to nearly $5.8 billion (2022), according to its most recent reported figures on TD Ameritrade’s platform.
This is the type of slow and steady growth we cherish in this sort of company and frankly, we expected the company’s total revenue to dip a little bit during 2020, but were shocked to find that it didn’t dip at all, and in fact, grew that year by a considerable amount.
If this company’s total revenue can rise at a solid rate during what has so far been the worst of COVID-19, there seemingly isn’t much that U-Haul can’t do, even during the tough economic seasons.
From the perspective of the company’s cash flow statement, U-Haul took a slight hit to the downside in terms of net income during both 2019 and 2020, however, this was to be expected as travel, broadly speaking was halted and frankly, given the particular severity of an extraordinary situation such as COVID-19 over that time period, we’re just thankful that the company’s net income remained positive during those years, respectively standing at $371 million and $442 million, according to TD Ameritrade’s platform.
Since then, the company’s net income has found its way back up to $611 million (2021) and just north of $1.1 billion in 2022.
While this recovery in net income was more than solid, as long as the company’s net income remained positive even during some of what has been the worst contemporary travel season, U-Haul’s net income and its total cash from operations put its resilience on full display.
U-Haul’s stock fundamentals
Usually, we’d try to devise some slightly drawn out, humorous way of introducing the company in question’s trailing twelve month (TTM) net profit margin, however, it just isn’t worth it this time around.
The numbers should speak for themselves.
Specifically, according to TD Ameritrade’s platform, U-Haul’s TTM net profit margin towers over the industry’s average at 16.55%, compared to the average of 7.15%.
From our perspective, this can likely be attributed to its considerable market share (dominance, really) in the DIY, mobile moving and storage categories that it has accumulated over the years, as the company was founded in 1945 and has developed a phenomenal base to operate and grow upon.
In all reality, U-Haul’s TTM net profit margin should be higher than that of the industry’s average just by virtue of being the huge company it has become, however, to have that much of a cushion (nearly 10%) separating itself from the industry, that is something somewhat remarkable.
Lastly, as it pertains to the company’s TTM returns on assets and investment and how they compare to the industry’s averages, U-Haul’s TTM returns on assets are a hair higher than the industry’s average, but nearly the exact same, as it’s stands at 5.60% to the industry’s average of 5.53%, according to TD Ameritrade’s platform.
Additionally, the company’s TTM returns on investment, also according to TD Ameritrade’s platform, are pegged at 6.22% compared to the industry’s average of 4.78%.
Should you buy U-Haul stock?
Ladies and gentlemen, the financial and operational resilience is strong with this one.
Its TTM net profit margin is markedly higher than the industry (on average), its core TTM returns on assets and investment are competitive to say the absolute least, its balance sheet is structured to punch through any rough air that may come its way and it is fairly evident that Americans, especially the younger generations like to move.
Combining all of these facts, trends and observations with the company’s inordinately low valuation (according to its present P/E ratio), we give U-Haul’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.