What a brutal six months it’s been for United Rentals. The stock has dropped 25.9% and now trades at $732.09, rattling many shareholders. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Following the pullback, is now a good time to buy URI? Find out in our full research report, it’s free.

Why Does United Rentals Spark Debate?

Owning the largest rental fleet in the world, United Rentals (NYSE: URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.

Two Things to Like:

1. Skyrocketing Revenue Shows Strong Momentum

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, United Rentals’s 13.5% annualized revenue growth over the last five years was exceptional. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

United Rentals’s EPS grew at 19.2% compounded annual growth rate over the last five years, higher than its 13.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect United Rentals’s revenue to rise by 6.1%, close to its 13.5% annualized growth for the past five years. This projection is underwhelming and suggests its newer products and services will not lead to better top-line performance yet. At least the company is tracking well in other measures of financial health.

Final Judgment

United Rentals’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 15.7× forward P/E (or $732.09 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

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