United Rentals: A Potential Undervaluation?
United Rentals has delivered a 19.4% return over the past year, sparking interest among investors. But is the stock currently priced fairly? A deep dive into its financials suggests a compelling opportunity. This analysis explores a Discounted Cash Flow (DCF) model and P/E ratio comparison to determine if United Rentals is undervalued.
Understanding the Discounted Cash Flow (DCF) Model
The DCF model estimates a company’s intrinsic value by projecting future cash flows and discounting them back to their present value. For United Rentals, the latest twelve-month free cash flow stands at approximately $1.93 billion. Analysts project free cash flow to reach $5.50 billion by 2035, based on a combination of analyst inputs and extrapolations.
Applying a discounted cash flow analysis, the model estimates an intrinsic value of around $1,143.26 per share. Considering the recent share price of $911.16, this suggests the stock is approximately 20.3% undervalued based on these assumptions.
Result: UNDERVALUED
Track United Rentals in your watchlist or portfolio, or discover 887 more undervalued stocks based on cash flows. For more details on our Fair Value calculation, visit the Valuation section of our Company Report.
P/E Ratio Analysis
For a profitable company like United Rentals, the Price-to-Earnings (P/E) ratio provides a quick assessment of investor sentiment. Currently, United Rentals trades at a P/E of 22.92x. This is close to the Trade Distributors industry average of 22.88x and slightly below the peer group average of 24.90x.
Simply Wall St’s Fair Ratio for United Rentals is 31.41x, factoring in earnings growth, profit margins, market cap, industry, and company-specific risks. This suggests that United Rentals may be undervalued based on a P/E basis.
Result: UNDERVALUED
Beyond the Numbers: Narratives and Community Insights
While P/E ratios offer valuable insights, a more comprehensive understanding of valuation comes from considering the underlying “Narratives” – the story you believe about a company. On Simply Wall St’s Community page, you can set your own assumptions, create financial forecasts, and determine a fair value tailored to your investment goals.
For example, a bullish narrative might assume higher long-term margins, resulting in a fair value well above $911.16. Conversely, a conservative narrative could lead to a fair value below the current share price.
What’s your take on United Rentals? Join the conversation on our Community page!
Disclaimer: This article by Simply Wall St is for general informational purposes only and does not constitute financial advice. It is based on historical data and analyst forecasts and does not consider your individual objectives or financial situation.
Source: Simply Wall St
