About United Rentals
Headquartered in Stamford, Connecticut, United Rentals is an important company on many counts.
From those who operate or work in a warehouse setting to those who work in the construction industry, both of which are relatively recession resistant sectors (although construction can be a bit seasonal, however, when considering how tied together it is with the real estate market), United Rentals offers plenty of cost efficient solutions through its rather brilliant business model in leasing out equipment to those, be it companies, individuals or other entities that otherwise maybe couldn’t afford to outright own said equipment and thus wouldn’t have otherwise been able to complete their projects on time, if at all.
It’s a simple yet effective business model and a sometimes desperate target consumer.
According to the company’s website, some of its more popular equipment it rents out includes scissor and boom lifts, warehouse forklifts, telehandlers, also renting out backhoes, air compressors, portable generators, utility vehicles and other machines and so many other tools that come in handy for those who work in a variety of industries most commonly within construction and again, the warehouse environment, broadly speaking.
With over 1,000 branch locations across the United States and Canada, it’s no wonder United Rentals reaches a nice chunk of customers in a variety of industries and is evidently a prime leader in the equipment rental arena.
As briefly alluded to in a few paragraphs above, while we’d love to say that United Rentals’ business model is largely recession resistant, it definitely has its fair share of vulnerabilities within the real estate sector, as, obviously, the economy continues to weaken there will be less and less developers and selected contractors putting projects together as it gets increasingly more challenging to borrow (or pool together capital) and build.
Don’t worry, we will be sure to reference some of the company’s recent numbers so as to attempt to verify whether or not we are on the right track.
With that, now seems to be an opportune time to get a bit more familiar with United Rentals and its core financial figures, metrics and ratios in hopes of employing a rating on this company’s stock (NYSE: URI) and our opinion regarding its future continued success and efficacy overall.
This is United Rentals.
United’s stock financials
United Rentals presently has a market capitalization (calculated by taking the number of outstanding shares and multiplying that figure by the current share price) of $28.18 billion, a share price of $409.96 a price-to-earnings (P/E) ratio of 13.15 all while shelling out an annual dividend of $5.92.
To put it simply, United Rentals is off to a wonderful start given that its share price (NYSE: URI) seems to be trading at a relative discount to what it is actually worth (referencing its current price-to-earnings ratio and the fact that it is well below the commonly held fair value benchmark of 20) as well as its sizable annual dividend it delivers to its investors of nearly $6 per annum.
No complaints so far.
With respect to the shape and condition of the company’s balance sheet overall, United’s executive team is in charge of handling and (strategically, hopefully) deploying around $24.2 billion in terms of total assets as well as approximately $17.1 billion in terms of total liabilities.
This doesn’t surprise us in the slightest since the equipment rental space is naturally one that requires being loaded with readily rented out inventory that is ultimately a cost to a company such as United Rentals until it is actually rented out.
Nevertheless, this company is still total asset-heavy enough for us to not become worried, as long as it continuously chips away at its outstanding debt(s) and other liabilities and keeps its products out of its branches and in the hands of its clients as much as possible.
Moving onto the company’s income statement, United Rentals’ total annual revenues have generally seen growth, at least when considering the past five years, weighing in at just north of $8 billion in 2018, rising to $9.3 billion the following year, back down to $8.5 billion (as reported in 2020), spiking back up to $9.7 billion in 2021, leading all the way up to its latest reported figure of $11.6 billion (as reported in 2022).
There’s definitely been some ebbing and flowing with this company’s total annual revenues, however, to a certain degree that is to be expected as United’s core business(es) naturally fluctuate in use with respect to say, the housing market, for instance, as more and more developers pursue projects, the more and more equipment they will be looking to rent, directly translating into revenues for United Rentals.
We’re personally comfortable with assuming this ebbing and flowing, as its total annual revenues have done a fine job holding up even throughout some of the more tumultuous years in recent history.
From the perspective of the company’s cash flow statement, United’s net income and its total cash from operations over the same time period (i.e., since 2018) have been both consistent and positive which implies to us that it has had little to no issue in extracting cash out of its multitude of rental operations, even during the recent rough patches endured by consumers and other businesses, which is something we certainly like to see in an established, well known company such as United Rentals.
United’s stock fundamentals
In getting a little more familiar with this company’s trailing twelve month (TTM) net profit margin to see how it measures up against that of the industry’s average, it can be seen (through the figures displayed on TD Ameritrade’s platform) that United’s is pegged at 17.65% to the industry’s lower respective average of 12.26%.
Obviously, this isn’t much of a bad thing at all given that United has been able to capture a greater overall trailing twelve month net profit margin with respect to the competition, which we presume to be largely regional and and nimble, which makes it all the more impressive that a national chain such as United has been able to outperform the competition (again, on average) on this front.
Lastly, United Rentals’ TTM returns on both assets and investment(s) both stand slightly less than those of the industry’s averages (also according to the figures displayed on TD Ameritrade’s platform), however, this makes sense to us given the fact that United, as briefly touched on in paragraphs above, has much more scaled operations than many (if not most) of its competitors and thus it will probably take some more time to produce higher returns in these regards given its scale, however, we don’t maintain much doubt that United Rentals can get this job done.
Should you buy United Rentals stock?
This company has a few things going for it from our vantage point.
This company has a sizable moat, a strong, protected annual dividend, a solid-as-a-rock balance sheet, an objectively undervalued share price (at the time of this writing, according to its listed prevailing price-to-earnings ratio) and, according primarily to its recent annual revenue figures and cash flow statement, a resilient business.
We’d say there isn’t much to immediately dislike in terms of United Rentals itself and its prospects.
Of course, this company isn’t completely immune to pressures coming from the slowing of the global economy, particularly within the residential and commercial real estate sectors (given the nature of its business), however, this company has certainly proven itself in recent years to be the real deal in doing what it can reasonably do to fend off these sort of macroeconomic threats and sensitivities.
All of this being said, we feel comfortable in giving this company’s stock (NYSE: URI) 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.