Is It Time To Consider Buying United Rentals, Inc. (NYSE:URI)?
Today we're going to take a look at the well-established United Rentals, Inc. (NYSE:URI). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at United Rentals’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for United Rentals
What Is United Rentals Worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.8x is currently trading slightly below its industry peers’ ratio of 10.99x, which means if you buy United Rentals today, you’d be paying a reasonable price for it. And if you believe United Rentals should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that United Rentals’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of United Rentals look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. United Rentals' earnings over the next few years are expected to increase by 28%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? URI’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at URI? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on URI, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for URI, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that United Rentals has 2 warning signs and it would be unwise to ignore them.
If you are no longer interested in United Rentals, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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