- If you are wondering whether Herc Holdings at around US$142.51 is offering value or asking you to pay up for growth potential, this breakdown will help you size up the stock with a clear valuation lens.
- The share price has moved 1.5% over the past week and 2.4% over the last month, with a 21.9% return over the past year. Year to date the stock is down 6.5%, which can change how you think about both upside and risk.
- Recent attention on Herc Holdings has centered on how its performance as a Trade Distributors stock fits into broader conversations about capital goods companies, especially as investors reassess which businesses they want exposure to. These shifts in focus help explain why the stock can deliver returns of 18.1% over three years and 46.9% over five years while still seeing shorter term pullbacks.
- Herc Holdings currently holds a valuation score of 5/6, which reflects the number of checks where it screens as potentially undervalued. The next sections will walk through how different valuation approaches arrive at that view, before finishing with a way to think about valuation that goes beyond just the numbers.
Approach 1: Herc Holdings Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes estimates of the cash a company could generate in the future and discounts those projected cash flows back to today, to arrive at an estimate of what the business might be worth right now.
For Herc Holdings, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $86.9 million. Analysts provide free cash flow estimates out to 2030, with a projected free cash flow of $841 million in that year. Beyond the analyst horizon, Simply Wall St extrapolates cash flows using its own assumptions to extend the projection period.
Bringing all of those projected cash flows back to today results in an estimated intrinsic value of $243.92 per share. Against a current share price of about $142.51, the DCF output implies the stock trades at a 41.6% discount, which suggests that Herc Holdings appears undervalued on this model.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Herc Holdings is undervalued by 41.6%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Approach 2: Herc Holdings Price vs Sales
For companies where earnings can be volatile, the P/S ratio is often a useful cross check because sales tend to be more stable than profits and are harder to influence with accounting choices.
In practice, investors are usually willing to pay a higher P/S multiple when they expect stronger growth or see lower risk, and a lower multiple when growth expectations are modest or risks are higher. So the question is whether Herc Holdings current P/S multiple lines up with what you are paying for that balance of growth and risk.
Herc Holdings trades on a P/S of 1.02x, compared with the Trade Distributors industry average of 1.10x and a peer group average of 2.96x. Simply Wall St also calculates a Fair Ratio of 2.31x, which is the P/S multiple it would expect based on factors such as the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics.
This Fair Ratio can be more useful than a simple peer or industry comparison because it adjusts for differences in quality, growth and risk rather than assuming all companies should trade on the same multiple. Compared with the current 1.02x P/S, the 2.31x Fair Ratio suggests Herc Holdings looks undervalued on this measure.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Herc Holdings Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about Herc Holdings to the numbers by linking your view of its revenue, earnings and margins to a financial forecast, an assumed fair value and then a simple comparison against the current price to decide whether the stock looks attractive or stretched. Each community Narrative, from those that see fair value closer to US$206 to others closer to US$100, updates automatically as new news or earnings arrive so you can quickly see how different investors interpret the same data and choose the version of the story that best fits your own outlook.
For Herc Holdings however we will make it really easy for you with previews of two leading Herc Holdings Narratives:
Fair value in this bullish narrative: US$206.00
Implied undervaluation vs last close: around 30.8% below this fair value
Assumed revenue growth rate: 8.86% per year
- Analysts in this camp focus on faster than expected benefits from the H&E acquisition, a shift toward higher margin specialty fleet, and better use of technology to support higher earnings quality.
- They frame Herc Holdings as well positioned to capture a large share of a multi year mega project pipeline, with national scale and brand helping it win long duration work.
- Their US$206 fair value hinges on revenue reaching about US$6.0b, higher margins, and a P/E of 15.0x by 2029, all discounted using a rate of 12.46%.
Fair value in this bearish narrative: US$120.00
Implied overvaluation vs last close: around 18.8% above this fair value
Assumed revenue growth rate: 9.39% per year
- Analysts in this group highlight execution risk around decarbonisation, automation, and digital disruption, which could pressure equipment utilization, pricing, and margins over time.
- They see Herc Holdings elevated leverage after acquisitions as a constraint on fleet upgrades and technology investment, which could weigh on competitiveness and earnings.
- Their US$120 fair value uses revenue and earnings growth assumptions but applies a lower future P/E multiple of about 13.08x, alongside a discount rate of roughly 12.40%, to reflect these risks.
If you want to go beyond the preview and see how other investors are weighing these bullish and bearish cases, you can review the full range of Herc Holdings community narratives alongside the latest data and valuation work in one place using the See what the community is saying about Herc Holdings.
Do you think there's more to the story for Herc Holdings? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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