Growing focus on advancements in battery technology and instant solutions amid traffic congestion provided by the rental service are expected to drive the growth in the rental industry. As the industry shows solid potential, quality rental stocks Copart, Inc. (CPRT), Group 1 Automotive, Inc. (GPI), and Cars.com Inc. (CARS) might be solid buys to capitalize on the industry tailwinds.
The increasing number of domestic and international travelers seeking convenient and flexible transportation options has escalated the demand for car rental services. Rapid urbanization and increasing traffic congestion have also boosted demand.
Moreover, the integration of technology into the car rental process, such as online booking platforms, mobile apps, and keyless entry systems, has enhanced convenience and accessibility, attracting more customers to choose car rental services. IMARC Group expects the global car rental market to reach $95.70 billion by 2028, exhibiting a CAGR of 3.1%.
Additionally, increasing environmental awareness, advancements in battery technology, and government initiatives to encourage the usage of electric vehicles are some of the factors that have led to the emergence of the e-mobility rental industry amid the growing need for environmentally friendly and sustainable transportation solutions.
Let’s discuss the stocks mentioned above in detail:
Copart, Inc. (CPRT)
CPRT provides online auctions and vehicle remarketing services in the United States, Canada, the United Kingdom, Brazil, the Republic of Ireland, Germany, Finland, the United Arab Emirates, Oman, Bahrain, and Spain.
CPRT’s trailing-12-month EBITDA margin of 41.6% is 208.3% higher than the 13.50% industry average. Its trailing-12-month net income margin of 30.72% is 384% higher than the 6.35% industry average.
CPRT’s total service revenues and vehicle sales increased 8.7% year-over-year to $1.02 billion in the fiscal third quarter, which ended April 30, 2023. Its net income increased 25.8% year-over-year to $350.43 million. Also, its net income per common share increased 24.1% year-over-year to $0.72.
SAP’s revenue is expected to rise 9% year-over-year to $962.78 million for the fiscal fourth quarter ending July 2023. The company’s EPS for the same quarter is expected to increase 15% year-over-year to $0.65. Additionally, the stock has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 57.7% over the past year to close the last trading session at $88.94.
CPRT’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CPRT also has an A grade for Quality and Sentiment and a B in Stability. It is ranked #5 out of 21 stocks in the B-rated Auto Dealers & Rentals industry.
To access additional ratings for CPRT’s Value, Growth, and Momentum, click here.
Group 1 Automotive, Inc. (GPI)
GPI operates in the automotive retail industry in the United States and the United Kingdom.
On June 1, 2023, GPI announced the acquisition of Beck & Masten Kia. The dealership is located in the Houston metropolitan area and expands the Company’s footprint to 15 brands and 18 dealerships in the Houston market.
The dealership is expected to generate $85 million in annual revenues, bringing GPI’s year-to-date total acquired revenues to $1 billion.
On March 28, GPI announced the expansion of its U.S. operations with the acquisition of Estero Bay Chevrolet in Estero, Florida. The dealership is located near the fast-growing city of Fort Myers in Southwest Florida. Estero Bay Chevrolet is the 5th ranked Chevrolet dealership in new vehicle volume in Florida. The dealership is expected to generate $150 million in annual revenues.
GPI’s trailing-12-month asset turnover ratio of 2.55x is 153.8% higher than the 1x industry average. Its trailing-12-month net income margin of 4.28% is 2% higher than the 4.20% industry average.
GPI pays a $1.80 per share dividend annually, which translates to a 0.71% yield on the current price. The company has a four-year average dividend yield of 0.88%.
During the fiscal first quarter that ended March 31, 2023, GPI’s total revenue increased 4.6% year-over-year to $787.70 million. Total gross profit increased 6.3% year-over-year to $110.40, while its adjusted earnings per common share came in at $10.91.
GPI’s revenue is expected to increase 2.6% year-over-year to $4.25 billion for the fiscal second quarter ended June 2023. Its EPS is expected to be $10.76 for the same quarter. Also, it has surpassed revenue and EPS estimates in each of the trailing four quarters.
Shares of GPI have gained 66% over the past nine months to close the last trading session at $253.55.
GPI’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Value and a B in Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated GPI for Growth, Sentiment, Stability, and Momentum. Get all GPI ratings here.
Cars.com Inc. (CARS)
CARS operates as a digital marketplace and provides solutions for the automotive industry. Its platform connects car shoppers with sellers.
CARS’ trailing-12-month EBIT margin of 10.26% is 20% higher than the 8.56% industry average. Its trailing-12-month gross profit margin of 68.49% is 38.1% higher than the 49.59% industry average.
CARS’ total revenue increased 5.6% year-over-year to $167.07 million during the first quarter that ended March 31, 2023. Net income increased 164.5% year-over-year to $11.48 million, while its earnings per share increased 183.3% year-over-year to $0.17.
Street expects CARS’s revenue for the fiscal second quarter ended June 2023 to increase 3.8% year-over-year to $169.06 million. Its EPS is expected to increase 14% year-over-year to $0.46 for the same quarter. Also, it has surpassed revenue estimates in three of the trailing four quarters.
The stock has gained 93.5% over the past year to close the last trading session at $19.16.
It is no surprise that CARS has an overall rating of B, which equates to a Buy in our POWR Ratings system.
CARS is graded an A in Growth and a B in Quality. It is ranked #4 in the same industry.
In addition to the grades stated above, CARS’ grades for Stability, Momentum, Sentiment, and Value can be seen here.
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CPRT shares were trading at $88.93 per share on Friday morning, down $0.01 (-0.01%). Year-to-date, CPRT has gained 46.05%, versus a 15.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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