United Rentals operates a nationwide heavy-equipment rental business with a capital‑intensive fleet and a financial profile that pairs strong profitability and rapid EPS expansion with elevated leverage and constrained near‑term liquidity.
The company’s profitability metrics are notable: trailing twelve‑month return on equity reached roughly 50.5% (2018‑09‑30), and operating margin sits near 24.6% with gross margin about 41.7%, reflecting sustained pricing and operating leverage (Return on Equity (ROE), Profit Margin Trends).
EPS has accelerated sharply, with trailing diluted EPS at $20.15 as of 2018‑09‑30 and multi‑year EPS growth that produced a reported five‑year EPS CAGR of about 61.5% (actual 0.6154) and year‑over‑year EPS gains as high as 142.5% in the most recent quarter (EPS Diluted & Revenue per Share, Revenue & EPS Growth). The market multiple has compressed from mid‑teens down to roughly 8.1x most recently (2018‑09‑30), a material change in valuation context (Price-to-Earnings (PE) Ratio Trend).
Counterbalancing those strengths are clear leverage and cash‑flow concerns. Debt to equity is elevated at about 3.08 and the current ratio is below 1.0 at roughly 0.77, indicating higher financial leverage and near‑term liquidity pressure even though interest coverage remains comfortable at ~10.6x (Strategic Capital Allocation).
There is also an earnings‑quality caveat: the most recent comparable Net Income (TTM) is $1.68B (2018‑09‑30) while the only operating cash flow TTM point in the dataset is $608M (2011‑12‑31), and investing/financing cash flows show sizable outflows of −$859M and −$775M in the most recent reported TTM periods, creating a gap that warrants closer, contemporaneous cash‑flow reconciliation (Revenue & Net Income, Earnings Quality, Strategic Capital Allocation).
The foundation of business quality and long-term value creation
Over the most recent quarters shown, UNITED RENTALS, INC.'s net income has risen consecutively from $183.0M (2018-03-31) to $270.0M (2018-06-30) and then to $333.0M (2018-09-30), indicating a short-term upward trend in quarterly profitability.
Revenue data are sparser by quarter but where reported show a rising pattern across the available periods: $1.36B (2017-03-31) to $1.60B (2017-06-30) and $1.73B (2018-03-31).
Most recent reported net income: $333.0M (2018-09-30)
Most recent reported revenue: $1.73B (2018-03-31)
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Jan 2016 to Dec 2016, United Rentals Inc converts approximately 42¢ of every revenue dollar into gross profit (gross margin: 41.7%).After accounting for operating expenses and taxes and expenses, the company retains 9.8% as net profit margin, resulting in $0.57B in net earnings.
Period Information
Report Type: Annual (10-K)
Period: Jan 2016 to Dec 2016
Analyzing long-term margin stability and competitive positioning
UNITED RENTALS, INC. shows a clear improvement in margins from the early sample through the mid-2010s, with gross margin rising from 34.0% (2012-03-31) to a mid-2015 high of 45.3% before edging down to the low 40s by year-end 2016. Operating margin followed a similar pattern, climbing from 21.8% (2013-12-31) to 29.4% (2014-12-31) and then declining to the mid-20s over 2015–2016. Net profit margin increased markedly from 1.7% (2012-06-30) into the single-digit to low-double-digit range by 2014–2016, with modest quarter-to-quarter volatility around roughly 9–10%.
Recent year-end figures show margins slightly below their mid-decade peaks but materially higher than the earliest readings in the series. The most recent observed values are: Gross Margin 41.7%; Operating Margin 24.6%; Net Profit Margin 9.8%.
Understanding Profit Margins
Between Jan 2016 and Dec 2016, United Rentals Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
UNITED RENTALS, INC.'s trailing twelve-month net income shows a clear upward trend in the most recent quarters: net income rose from $694.0M at 2017-09-30 to $1.35B at 2017-12-31, then continued higher through 2018-03-31 ($1.42B), 2018-06-30 ($1.55B) and 2018-09-30 ($1.68B). Earlier periods show much lower TTM net income (mid‑$500M range in 2014–2016 and as low as $62.0M in 2012), with a pronounced inflection beginning in late 2017 that sustained gains into 2018.
The dataset contains only a single trailing‑twelve‑month operating cash flow observation, $608.0M at 2011-12-31, so there are no contemporaneous operating cash flow points to compare directly with the 2017–2018 net income increases. The most recent Net Income (TTM) was $1.68B (period end 2018-09-30) and the most recent Operating Cash Flow (TTM) shown was $608.0M (period end 2011-12-31).
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
UNITED RENTALS, INC.'s trailing twelve-month Return on Equity has risen steadily over the most recent quarters. ROE climbed from 43.3% at 2017-12 to 46.4% at 2018-03, 49.0% at 2018-06 and reached 50.5% at 2018-09, reflecting a consistent upward trajectory across these quarters.
Viewed against an earlier history, the ROE has improved markedly from 34.3% at 2016-12 and from single-digit levels in 2012 (4.3%), with intermediate readings around 40% in 2014–2015. The most recent trailing twelve-month Return on Equity was 50.5% as of 2018-09-30.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
UNITED RENTALS, INC.'s recent TTM cash-flow entries show a marked reduction in investing outflows and a sharp move to financing outflows. Investing cash flow narrowed from a large negative $-2.00B at 2014-12-31 to $-859.0M at 2016-12-31, indicating smaller net cash used in investing over the most recent periods in the dataset. Financing cash flow moved from a positive $196.0M at 2014-12-31 to a substantial negative $-775.0M at 2015-12-31, representing a notable inflection toward capital returned or debt repayment in that interval. Operating cash flow in the provided dataset is only reported through 2011, at $608.0M, with no later operating TTM values included here.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
UNITED RENTALS, INC.'s trailing twelve‑month P/E has moved lower over the most recent year. After a mid‑2017 peak in the mid‑teens (16.8x on 2017‑09‑30), the ratio declined through late 2017 and into 2018, falling from 10.8x at 2017‑12‑31 to 9.8x at 2018‑03‑31 and 7.8x at 2018‑06‑30, with a modest uptick to 8.1x at 2018‑09‑30. Earlier history shows larger dispersion, including a 45.6x reading at 2012‑06‑30.
The key inflection occurred around 2017‑09‑30 when the P/E moved from mid‑teens into a downward trend over the subsequent four quarters; the most recent two quarters show a slight rebound from 7.8x to 8.1x. The most recent P/E ratio was 8.1x as of 2018‑09‑30.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.