With global tourism on the upswing, cities expanding rapidly, and the government’s efforts to cut emissions underway, the rental industry is booming. Therefore, it seems wise to consider investing in rental stocks Copart, Inc. (CPRT), Rush Enterprises, Inc. (RUSHA), and Cars.com Inc. (CARS), which are being favored by smart money.
Before delving into the highlighted stocks, let's explore the current dynamics of the rental industry.
The rental market is surging owing to the expansive growth of global travel and tourism. Concurrently, the burgeoning interest in travel and adventure among urban populations is actively supporting market expansion, with individuals increasingly opting for car rental services to achieve greater mobility and cost-effective travel solutions.
Following the pandemic, car rental firms have been experiencing a notable uptick in online engagements as well. Customers are increasingly utilizing user-friendly websites and mobile apps to reserve rental cars. Furthermore, companies are leveraging online travel agencies and third-party platforms, broadening their reach to a wider clientele.
In the near future, Autonomous Vehicles (AVs) or self-driving cars are poised to revolutionize the concept of on-demand car rentals. These vehicles would autonomously navigate between owners and renters, effortlessly parking at drop-off points, thereby catalyzing substantial growth within the industry.
Amid rapid urbanization, the demand for truck rental services is also escalating in parallel with the necessity for trucks to transport diverse commodities and merchandise. The utilization of rental trucks for logistics and across numerous construction sites is contributing to the increasing income of the truck rental market.
Worldwide, governments are prioritizing emission reduction and backing rentals as a notably cost-effective and environmentally friendly transport choice. The enactment of favorable regulations and increased public ecological consciousness should boost the sector's prospects.
According to a report by Fact.MR, worldwide demand for car rental services is expected to grow at a CAGR of 9.6% and reach $200 billion by 2033. Simultaneously, as per Market Research Future, the truck rental market industry is projected to grow at a 10.3% CAGR and reach $214.57 billion by 2030.
Considering the favorable industry outlook, let's delve into sound rental stocks CPRT, RUSHA, and CARS, which are seeing significant institutional investments.
Copart, Inc. (CPRT)
CPRT offers online auctions and vehicle remarketing services. It uses its Virtual Bidding Third Generation (VB3) Internet auction-style sales technology to offer car dealers a comprehensive range of services for processing and online vehicle sales. The company operates through two segments, United States and International.
129 institutions added new positions in CPRT, owning 3,807,270 shares in total.
CPRT’s trailing-12-month gross profit margin of 45.11% is 48.7% higher than the 30.33% industry average. Its trailing-12-month EBITDA margin of 41.61% is 205.5% higher than the industry average of 13.62%. In addition, the stock’s trailing-12-month net income margin of 30.72% compares to the industry average of 6.19%.
For the fiscal 2023 third quarter that ended April 30, CPRT’s total service revenues and vehicle sales increased 8.7% year-over-year to $1.02 billion. Its operating income rose 12.4% from the year-ago value to $418.92 million.
Moreover, the company’s non-GAAP net income and non-GAAP net income per common share grew 22.9% and 24.1% year-over-year to $346.06 million and $0.72, respectively.
The consensus revenue estimate of $3.85 billion for the fiscal year ended July 2023 reflects a 10% rise year-over-year. Likewise, the consensus EPS estimate of $1.24 for the same period indicates an 11.6% year-over-year improvement.
In addition, the consensus revenue and EPS estimates of $4.13 billion and $1.37 for the current fiscal year ending July 2024 indicate 7.1% and 10.5% growth from the prior year, respectively. Also, the company surpassed the consensus revenue estimates in all four trailing quarters.
CPRT has gained 40.4% over the past year to close the last trading session at $43.79.
CPRT’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CPRT has an A grade for Quality and a B for Stability and Sentiment. It has ranked #3 in the B-rated 21-stock Auto Dealers & Rentals industry.
In addition to the POWR Ratings I’ve just highlighted, you can see CPRT’s ratings for Growth, Momentum, and Value here.
Rush Enterprises, Inc. (RUSHA)
RUSHA is an integrated retailer of commercial vehicles and related services. It runs 125 franchised Rush Truck Centers in 23 states and 15 international dealerships in Ontario. The company also covers aftermarket parts, service, and body shops, along with financing, insurance, leasing, rental, chrome accessories, and tires.
21 institutions have added new positions in RUSHA, holding 1,336,215 shares.
The stock’s trailing-12-month CAPEX/Sales of 4.20% is 42.8% higher than the 2.94% industry average. In addition, its trailing-12-month ROCE, ROTC, and ROTA of 21.70%, 10.07%, and 9.15% compare to the respective industry averages of 13.81%, 6.81%, and 5.08%.
During the second quarter that ended June 30, 2023, RUSHA’s total revenue increased 11.8% year-over-year to $2 billion. Its gross profit grew 10.6% from the year-ago value to $413.85 million. Also, the company’s operating income rose 5.8% from the prior year’s quarter to $142.86 million.
In addition, as of June 30, 2023, the company’s total assets stood at $4.13 billion, compared to $3.82 billion as of December 31, 2022.
For the fiscal year ending December 2023, analysts expect RUSHA’s revenue to increase 7.7% year-over-year to $7.65 billion. Moreover, the company topped the consensus revenues and EPS estimates in all four trailing quarters. The stock has gained 23.7% over the past year, closing the last trading session at $62.51.
RUSHA’s positive prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
RUSHA has a B grade for Value and Sentiment. It is ranked #6 in the 21-stock Auto Dealers & Rentals industry.
Click here to access the additional RUSHA ratings (Growth, Momentum, Stability, and Quality).
Cars.com Inc. (CARS)
CARS operates as a digital marketplace and solution provider for the automotive sector. The company facilitates connections between dealers, manufacturers, and ready-to-buy shoppers. It provides financing tools with instant online loan screening and approvals and also offers shoppers digital resources for informed car buying decisions.
31 institutions added new positions in CARS, owning 1,055,169 shares in total.
CARS’ trailing-12-month gross profit margin of 68.33% is 38.4% higher than the 49.37% industry average. Its trailing-12-month EBITDA margin of 24.01% is 29.9% higher than the industry average of 18.49%. Moreover, the stock’s trailing-12-month net income margin of 16.90% compares to the industry average of 4.13%.
For the second quarter that ended June 30, 2023, CARS’ total revenue increased 3.3% year-over-year to $168.18 million. Its adjusted EBITDA marginally grew from the prior year’s period to $45.65 million. Furthermore, the company’s net income and EPS rose significantly year-over-year to $94.13 million and $1.37, respectively.
The company’s revenue for the fiscal year ending December 2023 is expected to increase 4.8% year-over-year to $685.52 million. Similarly, analysts expect CARS’ EPS to come in at $2.84, up 92% from the previous year. Over the past year, the stock has gained 42%, closing the last trading session at $18.67.
CARS’ robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
CARS has a B grade for Sentiment and Value. It is ranked #2 out of 21 stocks within the same industry.
Click here to access additional CARS ratings for Growth, Stability, Momentum, and Quality.
43 Year Investment Pro Shares Top Picks
Steve Reitmeister is best known for his timely market outlooks & unique trading plans to stay on the right side of the market action. Click below to get his latest insights…
Steve Reitmeister’s Trading Plan & Top Picks >
CPRT shares were trading at $44.93 per share on Wednesday afternoon, up $1.14 (+2.60%). Year-to-date, CPRT has gained 47.58%, versus a 16.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Rental Stocks Smart Money Is Invested In StockNews.com
