Launch Of Rbauctioncom Will Drive Scalable Expansion In CC&T Sector

Key Takeaways

• Enhancing technology capabilities and strategic acquisitions aim to drive scalable growth, expand global buyer base, and increase market share, boosting revenue.
  
• Investments in sales, maintenance, and transportation are expected to streamline operations and improve net margins, supporting future earnings growth.
  
• Exposure to macroeconomic risks and declining selling prices could pressure revenue and margins, while investments may strain net margins if returns are lacking.

Catalysts

Operates a marketplace that provides insights, services, and transaction solutions for buyers and sellers of commercial assets and vehicles worldwide.

• RB Global is enhancing its technology capabilities, such as launching rbauction.com on a modern technology stack, which is expected to drive scalable growth in the CC&T sector, potentially increasing revenue through improved transaction efficiencies.
  
• The acquisition of Boom & Bucket, a technology-enabled fixed-price marketplace, aims to create deep liquidity pools and expand the global buyer base, which could lead to higher market share and ultimately higher revenue.
  
• By expanding and optimizing sales coverage, particularly for small and midsized businesses in the CC&P sector, RB Global aims to strengthen relationships and capture additional market share, likely impacting revenue growth positively.
  
• Investments in North American sales capacity, leveraging SmartEquip to minimize maintenance costs, and streamlining asset transportation with VeriTread could streamline operations and enhance net margins by reducing costs.
  
• Strategic deployment of M&A and investment in technology might improve operational efficiency, contributing to higher earnings and supporting the growth of the adjusted EBITDA in 2025.

RB Global Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming RB Global's revenue will grow by 4.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.7% today to 14.6% in 3 years time.
• Analysts expect earnings to reach $722.0 million (and earnings per share of $3.98) by about March 2028, up from $372.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.7x on those 2028 earnings, down from 50.2x today. This future PE is greater than the current PE for the CA Commercial Services industry at 29.8x.
• Analysts expect the number of shares outstanding to grow by 0.56% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.27%, as per the Simply Wall St company report.

RB Global Future Earnings Per Share Growth

Risks

• The company's automotive sector faced a decline in average selling prices for salvage U.S. insurance vehicles and is exposed to macroeconomic uncertainties, which could impact future revenue and margins.
  
• There is a risk associated with tough year-over-year comparisons in the commercial construction and transportation sector due to previous benefits from suppliers and specific bankruptcy cases like Yellow Corporation, which could affect gross transaction value and revenue.
  
• Despite market share growth in the automotive sector, a previously announced customer loss negatively impacted the unit volume growth, indicating challenges in retaining large clients that could affect future revenue and market share.
  
• The anticipated increase in capital expenditures due to expansions and technology investments might pressure net margins if these investments do not yield the expected returns.
  
• The company's exposure to macroeconomic risks, such as interest rates and potential tariffs on international automotive parts and vehicles, could impact buyer sentiment, transaction volumes, and ultimately earnings.

Valuation

• The analysts have a consensus price target of $108.7 for RB Global based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $57.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.9 billion, earnings will come to $722.0 million, and it would be trading on a PE ratio of 34.7x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of $101.37, the analyst price target of $108.7 is 6.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.