Is Hertz a Buy Under $20?
The shares of car rental company Hertz Global (HTZ) experienced a significant price rebound after being hard hit by pandemic-induced headwinds. But although the company has experienced surging consumer demand...
The shares of car rental company Hertz Global (HTZ) experienced a significant price rebound after being hard hit by pandemic-induced headwinds. But although the company has experienced surging consumer demand due to easing travel restrictions, its shares have plunged nearly 38% in price over the past three months. So, is it worth betting on the stock at its current price level? Let's discuss.
Hertz Global Holdings, Inc. (HTZ) in Estero, Fla., is a vehicle rental company that offers services under the Hertz, Dollar, and Thrifty brands via company-owned, licensee, and franchisee locations.
The company has been dubbed the "original meme stock" because retail investors snapped its shares after the company filed for bankruptcy in 2020. Its shares have soared 981.1% in price over the past year.
However, closing yesterday's trading session at $20, the stock has declined 38.7% over the past three months and 17.7% over the past month after the rental-car company announced that it would sell $1.5 billion of five-year and eight-year senior unsecured notes.
Here's what could shape HTZ's performance in the near term:
Last November, HTZ's wholly owned indirect subsidiary, The Hertz Corporation, agreed to sell $500 million of 4.625% senior notes, due 2026, and $1.0 billion of 5% senior notes, due 2029, in a private offering. The company intends to use the proceeds to repurchase shares of its series A preferred stock, with the remaining proceeds used for general corporate purposes.
In November, HTZ's board of directors authorized a $2.0 billion share buyback program for the company's outstanding common shares. The repurchase program targets the remaining $200 million allowed for repurchase at the time of the company's first public offering and NASDAQ listing. According to HTZ, the repurchase program enables continued and profitable business investment while leveraging moderate balance-sheet leverage and permitting opportunistic share repurchases.
In terms of forward non-GAAP P/E, the stock is currently trading at 4.81x, which is 74.5% lower than the 18.85x industry average. Also, its 1.26x forward Price/Sales multiple is 14.8% lower than the 1.48x industry average. Furthermore, HTZ's 1.40x forward Price/Book is 48.3% lower than the 2.70x industry average.
HTZ's 23.2% EBITDA margin is 72.9% higher than the 13.4% industry average. Also, its $1.23 billion cash from operations is 492.5% higher than the $208.01 million industry average.
However, HTZ's 5.1% trailing-12-months net income margin is 21.2% lower than the 6.5% industry average. And its ROA and ROC are 66.7% and 18.9% lower than the 5.2% and 6.6% respective industry averages. Furthermore, its 0.35% trailing-12-months asset turnover is 56.4% lower than the 0.79% industry average.
POWR Ratings Reflect Uncertainty
HTZ has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. HTZ has a C for Quality. The company's mixed profitability is consistent with this grade.
Of 26 stocks in the B-rated Auto Dealers & Rentals industry, HTZ is ranked #18.
Beyond what I've stated above, you can view HTZ ratings for Growth, Stability, Value, Momentum, and Sentiment here.
While HTZ has benefited from travel recovery in the past few quarters, its announcement related to unsecured debt offering raised investors' concerns. In addition, analysts expect its EPS to decline by 36.5% year-over-year to $2.58 in fiscal 2022. So, we think investors should wait for its prospects to stabilize before scooping up its shares.
How Does Hertz Global Holdings Inc. (HTZ) Stack Up Against its Peers?
While HTZ has an overall C rating, one might want to consider its industry peers, Rush Enterprises Inc. (RUSHA), PT Astra International Tbk (PTAIY), and Penske Automotive Group Inc. (PAG), which have an overall A (Strong Buy) rating.
HTZ shares fell $20.00 (-100.00%) in premarket trading Wednesday. Year-to-date, HTZ has declined -19.97%, versus a -5.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
Entrepreneur Editors' Picks
Tory Burch Built a Brand Around Empowering Women. Now Her Foundation Is Furthering Her Mission: 'How Do We as a Company Have a Positive Impact on Humanity?'
This Founder Had to Play College Basketball in Men's Shorts and Shoes, So She Launched an Athletic Clothing Company Named After the Now 50-Year-Old Title IX Act
Is Beyoncé's 'Break My Soul' the Theme Song of the Great Resignation?
You're Probably Falling for All of Amazon Prime Day's Psychological Sales Tactics. A Marketing Professor Reveals Them — and How You Can Actually Get the Best Deal.
Comedian Paul Virzi: 'If You're Not Authentic, You Have Nothing'
Struggling to Come Up With Creative Ideas? Try Doing This.
Picking a Winning Emerging Brand Is How You Get Rich in Franchising. Here's How to Spot One.