URI - Ashtead: Long-Term Growth Might Be Fully Priced Though The Stock Deserves To Be In Your Radar

2024-01-31 05:41:31 ET

Summary

• Ashtead Group's revenue growth as of October 2023 was 16% YoY, with operating profit growing at 12% YoY.
• The company established guidelines for each country where it operates, indicating potential revenue slowdown in certain sectors.
• Despite a reduction in guidance, Ashtead is taking advantage of a consolidation process in its industry, where the company might be one of the biggest beneficiaries over the long haul.
• I rate the stock as a hold, but I am inclined to buy some shares now while waiting for a more attractive price, given its serious strategy of expansion and its long-term growth prospects.

I rate Ashtead Group (ASHTF)(ASHTY) as a hold, as even when the company has interesting drivers ahead that might support it to keep delivering growth in the next few years, most of those drivers might be priced in. Even when I rated the stock as hold, I could use the strategy of buying a few shares now and keep buying more if the stock goes down. There are interesting intangibles behind Ashtead's growth strategy in the construction and infrastructure sectors that are worth mentioning, although it is a very intensive-capital business. In the last few years, Ashtead's ambitious plans were reflected in its double-digit revenue growth, supported by the successful Sunbelt 3.0 strategy implemented in April 2021. Ashtead operates under the name Sunbelt Rentals.

The chart might support a bullish thesis, but I am not sure if the company will grow at the same rates as those shown in the last decade. However, I expect decent growth rates in the future while seeing how the company evolved from April 2012 to April 2023, increasing substantially its number of locations, which helps it to reinforce its cluster strategy that enables a faster and more efficient delivery of equipment needed by customers in many locations in North America. But there are more factors behind this company that will support its future growth despite its recent reduction of guidance for the full year 2024 in November 2023 ....

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