United Rentals currently trades at $1,096 and has been a dream stock for shareholders. It’s returned 248% since July 2021, more than tripling the S&P 500’s 72.6% gain. The company has also beaten the index over the past six months as its stock price is up 16.6% thanks to its solid quarterly results.
Is now still a good time to buy URI? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does URI Stock Spark Debate?
Owning the largest rental fleet in the world, United Rentals (NYSE: URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, United Rentals’s 14.1% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
United Rentals’s EPS grew at 19.6% compounded annual growth rate over the last five years, higher than its 14.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to Be Careful:
Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect United Rentals’s revenue to rise by 7%, close to its 14.1% annualized growth for the past five years. This projection is underwhelming and suggests its newer products and services will not accelerate its top-line performance yet. At least the company is tracking well in other measures of financial health.
Final Judgment
United Rentals’s merits more than compensate for its flaws, and with its shares outperforming the market lately, the stock trades at 22.4× forward P/E (or $1,096 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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