DCF Studio

    URI · NYQ · Industrials

    United Rentals, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 390.34

    Market price

    USD 1013.91

    Implied upside

    -61.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 28.8% of revenue against depreciation of 19.2%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 390.34-61.5%
    Exit multiple
    USD 1199.05+18.3%
    Market price
    USD 1013.91

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 17.9bnUSD 20.0bnUSD 22.3bnUSD 24.8bnUSD 27.6bn+11.4%
    EBITUSD 4.7bnUSD 5.3bnUSD 5.9bnUSD 6.6bnUSD 7.3bn+11.4%
    NOPATUSD 3.7bnUSD 4.2bnUSD 4.7bnUSD 5.2bnUSD 5.8bn+11.4%
    Add depreciation & amortisationUSD 3.4bnUSD 3.8bnUSD 4.3bnUSD 4.8bnUSD 5.3bn+11.4%
    Less capital expenditureUSD -5.2bnUSD -5.8bnUSD -6.4bnUSD -7.1bnUSD -8.0bn+11.4%
    Less increase in working capitalUSD -482.3mUSD -537.4mUSD -598.7mUSD -667.0mUSD -743.1m+11.4%
    Free cashflow to firmUSD 1.5bnUSD 1.7bnUSD 1.9bnUSD 2.1bnUSD 2.4bn+11.4%
    Discount factor0.94690.84910.76140.68280.6123-
    Present valueUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bn-0.1%
    Present Value Of The ForecastUSD 7.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.527Reported 1.787, pulled toward 1.0 (Blume)
    Cost of equity13.40%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 63.1bn80.1% of capital
    Total debtUSD 15.7bn19.9% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC11.52%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 390.34

    82% of EV

    Forecast FCFF, final year
    USD 2.4bn
    Capex at depreciation, working capital in reinvestment
    USD 5.8bn
    Less reinvestment at g/ROIC (17.6% of NOPAT)
    USD -1.0bn
    Capitalised
    USD 4.8bn
    ROIC (reported)
    14.2%
    Terminal value, undiscounted
    USD 54.1bn
    Terminal value, discounted
    USD 33.1bn
    Enterprise value
    USD 40.4bn
    Less net debt
    USD 15.2bn
    Equity value
    USD 25.2bn

    Exit at 11.1x EBITDA

    Value per shareUSD 1199.05

    92% of EV

    Terminal value, undiscounted
    USD 139.4bn
    Terminal value, discounted
    USD 85.4bn
    Enterprise value
    USD 92.7bn
    Less net debt
    USD 15.2bn
    Equity value
    USD 77.5bn

    Spread between methods: 102%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.52%555.28575.21597.68623.28652.79
    10.52%454.06466.74480.75496.37513.92
    11.52%373.65381.66390.35399.82410.24
    12.52%308.37313.28318.49324.05330.03
    13.52%254.41257.21260.11263.11266.23

    Outlined: this model. Green text: above today's price of 1013.91. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.4%30.7%+19.3pp
    EBIT margin26.5%47.4%+21.0pp
    Discount rate11.5%7.4%-4.1pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.