Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a hold with a ratings score of C- . The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and disappointing return on equity.
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Highlights from the ratings report include:
- URI's very impressive revenue growth greatly exceeded the industry average of 16.8%. Since the same quarter one year prior, revenues leaped by 57.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for UNITED RENTALS INC is rather high; currently it is at 55.70%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.20% is in-line with the industry average.
- Compared to its closing price of one year ago, URI's share price has jumped by 123.56%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Trading Companies & Distributors industry and the overall market, UNITED RENTALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $88.00 million or 38.02% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It offers approximately 3,000 classes of equipment for rent to customers comprising construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The company has a P/E ratio of 42.6, above the average diversified services industry P/E ratio of 38.2 and above the S&P 500 P/E ratio of 17.7. United Rentals has a market cap of $2.98 billion and is part of the
industry. Shares are up 9.1% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.