Between early spring and late August, many indices worldwide made a remarkable recovery. The UK's largest equity index performed similarly. Between mid-March and the last trading day in August, it gained more than 21%. But since then, it's been flat, up just 0.20%. In other words, the market can consolidate and move sideways.
However, there is one stock that has risen in recent weeks, and that is UK-based global rental company Ashtead (LON 🙂 (OTC :).
Ashtead Group 1-Year Chart.
The business line may sound like a somewhat boring industry, but not to the company's shareholders. Year-to-date, the stock is up about 21%, which technically means it is in a bull market. Shares hit a record high on October 8.
Today we will look at this industrial equipment group whose presence in the US and Canada is growing rapidly to see what investors can expect from its stock in the coming months.
Ashtead & # 39; s North American Operations Are Growing
Ashtead has national networks in the US, UK and Canada, trading under the name Sunbelt Rentals.
The company serves a wide variety of markets where the construction industry tops the list. His equipment can be seen in the construction and conversion of airports, bridges, roads, office and residential buildings, data centers, schools and shops.
Disaster response activities have also grown in recent quarters. The sector includes fire, weather-related incidents (such as hurricanes, storms or floods), residential emergencies, mobile testing facilities and COVID-19 related emergency management.
The company has been identified as an essential company in the US, UK and Canada in times of need and emergency. Additionally, facility maintenance companies or live event organizers also hire them from the company.
The group has always had a significant footprint in the US. We are now seeing a greater focus on North America. Management highlights:
"The US remains our largest market and we see significant potential in our newest market, Canada. The UK market is a much more subdued climate than North America."
On September 8, the company released financial information for the first quarter ending July 31. Although the company was adversely affected by the pandemic, both sales and profits exceed expectations. Sales were £ 1.2 billion ($ 1.55 billion) and legal earnings per share (EPS) was £ 0.32 ($ 0.41).
CEO Brendan Horgan said:
"This resilient performance illustrates the successful execution of our long-term strategy, which we started after the last recession, to broaden and diversify our end markets and strengthen our balance sheet … The measures we have taken to optimize cash flow , capital expenditures and operating expenses, resulted in record-free cash flow for the first quarter. "
The quarterly results also showed more than 80% of US revenues. Construction activity in the country has been picking up in recent weeks. In return, that meant more rental for industrial items such as forklift trucks, trucks, excavators and generators. Management expects a further structural shift towards renting out clients instead of owning clients.
In June, the US government announced it would push for an infrastructure spending bill of approx. Subsequently, the House passed an alternative trillion infrastructure law. We don't have a final agreement on either side of the aisle yet. Whoever wins the US presidential election is likely to see more government spending in the country. The US will continue to build highways, bridges, public buildings or IT infrastructure, and that can only be good for the stock prices of Ashtead and his colleagues.
Analysts agree that a combination of robust earnings results, stable dividend policies and growth in the US operations have supported the solid performance of Ashtead stocks.
Bottom Line
Recent statistics show that Ashtead is the second largest equipment rental company in the world by revenue. It follows United Rentals Inc (NYSE :). The URI share is also up over 19% YTD, reaching a record high on Oct. 8
1 year overview of United Rentals.
Given the potential growth in the industrial rental sector, we like stocks of both companies. The long-term strength of their stock prices is likely to continue. However, due to the recent price increase, we would consider waiting for a pullback of both stocks before putting capital into the company.
Finally, the forward P / E ratios of Ashtead and United Rentals are 22.68 and 12.77, respectively. P / S ratios also show a similar trend, with the metric for Ashtead being 2.92 and United Rentals being 1.65. While these numbers wouldn't be enough to make an investment decision, Ashtead is currently valued more richly than its main competitor.
