Herc Stock To $107?

Herc (HRI) stock has jumped 6.9% during the past day, and is currently trading at $153.46. Our multi-factor assessment suggests that it may be time to sell HRI stock. We have, overall, a pessimistic view of the stock, and a price of $107 may not be out of reach. We believe there are a few things to fear in HRI stock given its overall Moderate operating performance and financial condition. Hence, despite its Low valuation, this makes the stock look Risky.

Below is our assessment:

Ask yourself – Is holding HRI stock risky? Of course it is. High Quality Portfolio mitigates that risk.

Let’s get into details of each of the assessed factors but before that, for quick background: With $5.1 Bil in market cap, Herc provides equipment rental and sales of aerial, earthmoving, material handling, and construction supplies in the U.S. and internationally.

[1] Valuation Looks Low

This table highlights how HRI is valued vs broader market. For more details see: HRI Valuation Ratios

[2] Growth Is Very Strong

• Herc has seen its top line grow at an average rate of 15.6% over the last 3 years
• Its revenues have grown 12% from $3.4 Bil to $3.9 Bil in the last 12 months
• Also, its quarterly revenues grew 35.2% to $1.3 Bil in the most recent quarter from $965 Mil a year ago.

This table highlights how HRI is growing vs broader market. For more details see: HRI Revenue Comparison

[3] Profitability Appears Weak

• HRI last 12 month operating income was $462 Mil representing operating margin of 11.9%
• With cash flow margin of 28.4%, it generated nearly $1.1 Bil in operating cash flow over this period
• For the same period, HRI generated nearly $-69 Mil in net income, suggesting net margin of about -1.8%

This table highlights how HRI profitability vs broader market. For more details see: HRI Operating Income Comparison

[4] Financial Stability Looks Very Weak

• HRI Debt was $9.8 Bil at the end of the most recent quarter, while its current Market Cap is $5.1 Bil. This implies Debt-to-Equity Ratio of 193.4%
• HRI Cash (including cash equivalents) makes up $61 Mil of $14 Bil in total Assets. This yields a Cash-to-Assets Ratio of 0.4%

[5] Downturn Resilience Is Very Weak

HRI has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• HRI stock fell 55.9% from a high of $196.39 on 9 November 2021 to $86.52 on 23 June 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 22 October 2024
• Since then, the stock increased to a high of $239.28 on 6 November 2024 , and currently trades at $153.46

 
2020 Covid Pandemic

• HRI stock fell 74.2% from a high of $49.34 on 2 January 2020 to $12.72 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 November 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read HRI Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.