United Rentals, Inc. (NYSE:URI) is an equipment rental company and has 836 rental locations across The States and Canada operating in two segments: General Rentals and Trench Safety, Power and HVAC. On January 22, 2014, the company reported fiscal first quarter earnings of $1.59 per share, which beat the consensus analysts' estimates by $0.13. In the past year the company's stock price is up 76.31% while the S&P 500 (NYSEARCA:SPY) has gained 19.89% in the same time frame. I've already purchased a batch of the stock for my growth portfolio and am up 4.80% on the batch. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if right now is a good time to purchase more of the stock for my portfolio.
The company currently trades at a trailing 12-month P/E ratio of 26, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 12.33 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $7.7 per share and I'd consider the stock inexpensive until about $116. The 1-year PEG ratio (0.98), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is inexpensively priced based on a 1-year EPS growth rate of 26.49%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 26.49%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 31.4%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company does not sport a dividend to speak of but is sporting return on assets, equity and investment values of 3.4%, 22.8% and 9.5%, respectively, which are all respectable values. In this particular instance, I will forego the dividend aspect of the financials because the stock is in my growth portfolio; and in the growth portfolio a stock does not have to have a dividend.
Looking first at the relative strength index chart [RSI] at the top, I see the stock hovering around overbought with a current value of 68.13. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars increasing in height, indicating the bullish momentum. As for the stock price itself ($94.91), I'm looking at $98.70 to act as resistance and the 20-day simple moving average (currently $90.03) to act as support for a risk/reward ratio which plays out to be -5.14% to 4%. Just to note, the stock keeps riding its short-term 20-day simple moving average upwards, and it ever breaks that trend it hits the intermediate-term 50-day simple moving average and bounces right off of it. Those are some pretty solid trend lines to follow!
- The company acquires privately held National Pump. For $780 million, the company gained entry into the pump business and the purchase should be accretive immediately.
If you believe global turmoil is going to be increasing in the near future and want to stay away from truly global companies than this may just be the stock for you. It is a play on the increase in commercial construction spending here at home. Any dip that may occur in it because of global turmoil is just another buying opportunity. Fundamentally, the stock is inexpensively priced on next year's earnings and on earnings growth. Financially, I believe all the returns are safe and sound. Technically, it appears the stock is overbought. Due to the overbought technicals, impending global turmoil, and overall market skittishness, I'm not going to be buying anymore of the stock at this price. I definitely will be looking at it on any dips though.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am long URI, SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.