$Herc Holdings (HRI.US)$It is a lift leasing company. It was...
$Herc Holdings(HRI.US$It is a lift leasing company. It was spun off and listed in 2016. Revenue increased for 4 years in addition to shrinking 10.9% in 2020. In particular, revenue soared by 32.1% in 2022, with an average 5-year growth rate of 9.3%. Operating profit increased sharply after shrinking 16.5% in 2020, and soared 48% in 2022. The main reason for the rapid increase in operating profit was that gross margin continued to increase for 5 years, from 24.2% to 38.9%. Net profit increased sharply in the past 3 years and increased by 47.2% in 2022.
In the first two quarters of 2023, revenue increased by 27.7%, operating profit increased by 32.6%, net profit increased by 9.2%, operating profit was 2.75 times that of interest expenses, and the interest burden was extremely heavy.
The balance sheet shows that there have been many acquisitions in the past two years. Goodwill and other intangible assets have grown from 396 million in early 2021 to 850 million at the end of 2022, accounting for 77% of net assets of 1.109 billion yuan.
Currently, the price-earnings ratio is 12.3, and the price-earnings ratio TTM has dropped slightly to 11.6. The valuation does not seem high, but in reality, profits have all gone into fixed assets. In 2022 alone, fixed assets increased by 1.4 billion dollars, while profits were only 330 million dollars in that year. Therefore, free cash flow is extremely poor. Coupled with high debt costs, it is unattractive.
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