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, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow.
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Highlights from the ratings report include:
- URI's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 71.0%. 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Trading Companies & Distributors industry average. The net income increased by 12.3% when compared to the same quarter one year prior, going from $65.00 million to $73.00 million.
- Compared to its closing price of one year ago, URI's share price has jumped by 53.45%, 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. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, UNITED RENTALS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- Net operating cash flow has declined marginally to $153.00 million or 2.54% 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. United Rentals has a market cap of $4.63 billion and is part of the services sector and diversified services industry. The company has a P/E ratio of 65.7, above the S&P 500 P/E ratio of 17.7. Shares are up 9.9% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.
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