TRG | The Bottom Line – 8/18

TRG hosted a virtual NDR with southeastern-focused equipment rental company H&E Equipment (HEES, $45.19, market cap of $1.6B) this past week, highlighting an opportunity at the right price. We have long-favored the publicly-traded equipment rental companies (URI, HRI, and HEES), given these companies are relatively large in a fragmented and growing equipment rental industry. HEES, URI and HRI have scale advantages versus smaller private peers, which has fueled strong revenue growth with rising EBITDA margins, alongside very modest leverage. That said, as this stock chart demonstrates, H&E’s stock price has lagged the other two companies meaningfully. We believe this valuation disparity is unjustified. H&E is now a pure-play rental company after having divested its distribution units at the end of calendar 2022.  H&E is smaller in size and yet maintains EBITDA margins in a similar zone to its larger public peers (HEES ~46%, HRI ~46%, URI ~48%). This delta represents an opportunity. We believe H&E will grow revenue 19% and 15% in each of the next two years, yet sells at ~4x EV/EBITDA.  As such, we expect robust EBITDA growth and multiple expansion in the future.

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TRG | The Bottom Line – 8/25

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TRG | The Bottom Line – 8/11