Is Herc Holdings Inc.’s (NYSE:HRI) Growth Strong Enough To Justify Its May Share Price?

Looking at Herc Holdings Inc.’s (NYSE:HRI) fundamentals some investors are wondering if its last closing price of $41.33 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Check out our latest analysis for Herc Holdings

Has the HRI train has slowed down?

Herc Holdings is poised for significantly high earnings growth in the near future. The consensus forecast from 6 analysts is extremely bullish with earnings forecasted to rise significantly from today’s level of $2.548 to $4.468 over the next three years. On average, this leads to a growth rate of 20% each year, which indicates an exceedlingly positive future in the near term.

Can HRI’s share price be justified by its earnings growth?

Herc Holdings is available at a price-to-earnings ratio of 16.22x, showing us it is undervalued relative to the current US market average of 17.89x , and overvalued based on current earnings compared to the Trade Distributors industry average of 16.1x .

NYSE:HRI Price Estimation Relative to Market, May 17th 2019
NYSE:HRI Price Estimation Relative to Market, May 17th 2019

We already know that HRI appears to be overvalued when compared to its industry average. But, to be able to properly assess the value of a high-growth stock such as Herc Holdings, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 16.22x and expected year-on-year earnings growth of 20% give Herc Holdings a low PEG ratio of 0.83x. This means that, when we account for Herc Holdings’s growth, the stock can be viewed as fairly valued , based on the fundamentals.

What this means for you:

HRI’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are HRI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has HRI been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of HRI’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.