Valens Equity Weekly Insights - 2023 06 06
United Rentals (URI) has consolidated its way to the top spot in the equipment rental industry to benefit from strong macro tailwinds. Uniform Accounting shows how profitable the business is, and it shows that the market's expectations are far too bearish. That makes United Rentals a compelling buy.United Rentals has acquired its way to a 17% market share in the equipment rentals industry. After expanding into specialty rentals, it has consistently generated 12%-15% Uniform ROA while consistently growing 8%+. We are likely starting a multi-year capex cycle that will directly benefit United Rentals' business, and yet the market expects both returns and growth to fade to multi-year lows.
United Rentals' management team is aligned to focus on growth, margins, and turns, the three drivers of profitability. This is great alignment for the business.
Management's confidence in the Q1 earnings call about EBITDA margin expansion and its competitive positioning suggest that management is executing to perfection.
URI
United Rentals is an equipment rental company that operates throughout the United States and Canada, and Europe. The company's general rentals segment includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities. This segment's customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The company's trench, power and fluid solutions segment includes the rental of construction products and related services. This segment consist of: Trench Safety region, Power and Heating, Ventilating and Air Conditioning region; and Fluid Solutions and Fluid Solutions Europe regions.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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