Hertz Global Holdings, Inc. (HTZ) in Estero, Fla., is a vehicle rental company that offers services under the Hertz, Dollar, and Thrifty brands via company-owned, licensee, and franchisee locations. 

The company has been dubbed the "original meme stock" because retail investors snapped its shares after the company filed for bankruptcy in 2020. Its shares have soared 981.1% in price over the past year.

However, closing yesterday's trading session at $20, the stock has declined 38.7% over the past three months and 17.7% over the past month after the rental-car company announced that it would sell $1.5 billion of five-year and eight-year senior unsecured notes.

Here's what could shape HTZ's performance in the near term:

Additional Financing

Last November, HTZ's wholly owned indirect subsidiary, The Hertz Corporation, agreed to sell $500 million of 4.625% senior notes, due 2026, and $1.0 billion of  5% senior notes, due 2029, in a private offering. The company intends to use the proceeds to repurchase shares of its series A preferred stock, with the remaining proceeds used for general corporate purposes.

Share Repurchase

In November, HTZ’s board of directors authorized a $2.0 billion share buyback program for the company's outstanding common shares. The repurchase program targets the remaining $200 million allowed for repurchase at the time of the company's first public offering and NASDAQ listing. According to HTZ, the repurchase program enables continued and profitable business investment while leveraging moderate balance-sheet leverage and permitting opportunistic share repurchases.

Discounted Valuations

In terms of forward non-GAAP P/E, the stock is currently trading at 4.81x, which is 74.5% lower than the 18.85x industry average. Also, its 1.26x forward Price/Sales multiple is 14.8% lower than the 1.48x industry average. Furthermore, HTZ's 1.40x forward Price/Book is 48.3% lower than the 2.70x industry average.

Mixed Profitability

HTZ's 23.2% EBITDA margin is 72.9% higher than the 13.4% industry average. Also, its $1.23 billion cash from operations is 492.5% higher than the $208.01 million industry average.

However, HTZ's 5.1% trailing-12-months net income margin is 21.2% lower than the 6.5% industry average. And its ROA and ROC are 66.7% and 18.9% lower than the 5.2% and 6.6% respective industry averages. Furthermore, its 0.35% trailing-12-months asset turnover is 56.4% lower than the 0.79% industry average.

POWR Ratings Reflect Uncertainty

HTZ has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. HTZ has a C for Quality. The company's mixed profitability is consistent with this grade.

Of  26 stocks in the B-rated Auto Dealers & Rentals industry, HTZ is ranked #18.

Beyond what I've stated above, you can view HTZ ratings for Growth, Stability, Value, Momentum, and Sentiment here.

Bottom Line

While HTZ has benefited from travel recovery in the past few quarters, its announcement related to unsecured debt offering raised investors' concerns. In addition, analysts expect its EPS to decline by 36.5% year-over-year to $2.58 in fiscal 2022. So, we think investors should wait for its prospects to stabilize before scooping up its shares.

How Does Hertz Global Holdings Inc. (HTZ) Stack Up Against its Peers?

While HTZ has an overall C rating, one might want to consider its industry peers, Rush Enterprises Inc. (RUSHA), PT Astra International Tbk (PTAIY), and Penske Automotive Group Inc. (PAG), which have an overall A (Strong Buy) rating.

HTZ shares fell $20.00 (-100.00%) in premarket trading Wednesday. Year-to-date, HTZ has declined -19.97%, versus a -5.06% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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