Custom Truck One Source, Inc. (CTOS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $9.20, Custom Truck One Source, Inc. (CTOS) is priced for +13.4% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/CTOS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 7: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.8%); the inversion above states its own rate.

Per-Model Detail (n=7)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• The business rents and sells specialty equipment for utility and infrastructure work, and its rental fleet of more than 10,400 units averaged 2.9 years of age at the end of 2025, which the company describes as among the youngest in the industry.
• Trailing operating margin of about 5.6% is a trough reading rather than a normal one, since the same business has produced operating margins closer to 12.8% measured across its own cycle, and roughly 1.6 billion dollars of net borrowing sits on top at about 6.74x through-cycle operating profit.
• Second-quarter results are due August 3, 2026, and the two lines that move first are fleet utilization and the average original equipment cost of the fleet actually out on rent.

Bull Case

The income statement reports a loss for the trailing year. The balance sheet reports a company that spent that year getting bigger. Rental equipment at cost rose to $1,664.2 million at December 31, 2025 from $1,522.7 million a year earlier, and the fleet it belongs to averaged 2.9 years of age, which the 10-K calls among the youngest in the industry. A firm in genuine retreat does not add equipment and keep its average asset three years old. The loss is what depreciation on a young, growing fleet does to reported earnings while the fleet is still filling up.

What that fleet does for a living matters more than the accounting. The company describes its core business as equipment "utilized by service providers in infrastructure development and improvement work", sold or rented to "a diverse customer base, including utilities and contractors, for the maintenance, repair, upgrade, and installation of critical" infrastructure. Bucket trucks, digger derricks, cranes and the trailers that move them. This is the equipment that gets used when a utility replaces poles and conductors, hardens a distribution network, or connects new load. That work is not a construction cycle in the ordinary sense. It is maintenance of a grid that has to be maintained whether or not the economy cooperates.

The rental side turned in the March quarter. The latest quarterly filing attributes the increase in rental revenue to "higher fleet utilization of 3.7% for the three months ended March 31, 2026, driven by higher average OEC on rent of 11.8%". More of the fleet earning, and a larger fleet earning: those two together are the whole mechanism by which a rental business recovers, and both moved the right way in the same quarter.

Now the number that reframes the rest. Trailing operating margin sits near 5.6%. Measured across its own cycle rather than at the bottom of one, the same revenue base has produced operating margins closer to 12.8%. That is a recovery to economics this company has already demonstrated, not an ascent to some new standard it has never met. What today's quote actually asks for is modest by comparison: roughly 8% annual growth in operating profit, held for about five years. The recent record is inside that range. The demand is on persistence, not on pace.

Structure explains the margin gap against the cohort, and it is worth being precise about. URI earns an operating margin of 24.7% and MGRC earns 25.5%, but both are close to pure rental businesses. Custom Truck also builds and sells trucks, an activity that turns inventory rather than depreciating a fleet and carries structurally thinner margins on much larger revenue per unit. Reorganized as of January 1, 2026, the company now reports a rental segment and a segment named "Specialty Truck Equipment & Manufacturing ("STEM")", which makes the split visible. The rental half is the part that compounds; the manufacturing half is what lets the company build to a customer's specification and then rent the same machine if the customer would rather not own it.

Bear Case

One assumption carries this valuation, and the company did not earn it last year. Through its own cycle this business has produced operating margins near 12.8%. The trailing year produced about 5.6% and a small net loss. Every point of the gap between those two figures is an assumption that the last twelve months were the trough of something rather than the shape of the business. That assumption may well be right. It is still an assumption, and it is doing all the work.

Leverage is what makes the assumption expensive if it is wrong. Net borrowing runs roughly 1.6 billion dollars against a market value near 2.5 billion, or about 6.74x through-cycle operating profit. Measured against what the business actually earned in the trailing year rather than through the cycle, the same borrowing is several times heavier. The company has room today: borrowing availability under its asset-based facility was $248.1 million at December 31, 2025, and the filing notes that its fixed charge coverage test was "inapplicable" at that date because availability exceeded the required threshold. That covenant becomes applicable precisely when availability falls, which is to say precisely when the business is under pressure. The 2029 Secured Notes mature April 15, 2029 and the asset-based facility on August 9, 2029, so refinancing is not next year's problem. It is a problem that gets priced against whatever the operating recovery looks like by then.

The demand side is not fully in the company's hands either. Its own risk disclosure is direct about it: "Our business may be impacted by government spending. A number of our customers are impacted by government funding of infrastructure projects", and separately that "Regulatory, technological advancement, or other changes in our core end-markets may affect our customers' spending on the products and services we provide". Utility capital budgets are set by regulators and rate cases, not by demand, and they can be deferred without anything visible breaking. A fleet is a fixed cost that keeps depreciating while customers wait.

The cohort supplies the cautionary version. WSC runs a rental business of comparable revenue scale and saw revenue fall 4.1% with a negative net margin over the trailing period, on an operating margin of 7.0%. That is what the down leg looks like in an asset-heavy rental model: the fleet does not shrink as fast as the revenue does, and the depreciation shows up regardless.

The last thing to hold in view is how sensitive the comfortable-looking arithmetic is. Each additional percentage point of required return moves the growth the price demands by roughly 6.6 percentage points. For a company with this much borrowing, the required return is not a settled input. A modestly higher cost of capital turns an 8% growth requirement into something the company has no recent record of delivering. None of the standard frames reach today's quote to begin with: it runs about twice what the earnings-power methods reach and about 3.2 times the asset-value methods.

Valuation

What the price assumes here is unusually mild for a company that reported a loss. Enterprise value works out to about 17 dollars for every dollar of operating profit measured through the cycle rather than at the trough, and inverting that leaves a requirement of roughly 8% annual growth in operating profit sustained for about five years. The company's recent pace is inside that band. The stretch is in how long the pace has to persist, not in the pace itself.

Two things are worth saying plainly about how that figure is built. The first is that it rests on normalized economics: the company's own through-the-cycle operating margins near 12.8% applied to today's revenue, rather than the roughly 5.6% the trailing statements show. The second is the discount rate. It is set at 8.6%, and each further percentage point of required return raises the growth demand by roughly 6.6 percentage points. That is an unusual amount of movement from a single input, and it is a fair description of what it means to value an asset-heavy business carrying this much borrowing.

Set against the methods, the price still sits above all of them. The earnings-power methods, which capitalize today's cash generation and credit no growth at all, reach about half the price. The book-value lens reaches less still. Shareholders' equity works out to $3.55 a share on the latest reported figures, which is all the asset-value methods have to work with, and against those methods the quote sits about 3.2 times higher. Peer multiples come closest, at about 1.76 times what the peer-multiple methods reach. No family gets there, which is another way of stating what the normalized framing already said: what is being paid for is an earnings base the trailing statements do not yet show.

The cohort makes the position legible rather than flattering. URI earns a 24.7% operating margin on $16.4 billion of revenue growing 5.0%, and MGRC earns 25.5% on $947 million growing 3.1%. Custom Truck's blended margin is far below both, but roughly half of what it does is selling and building trucks rather than renting them, and that mix carries thinner margins by construction. On the multiple itself the company sits in the lower half of its peer range, which is the more relevant comparison and is the reason the priced-in demand comes out modest.

Borrowing is the constraint that bounds all of it. Roughly 1.6 billion dollars of net borrowing against a market value near 2.5 billion means the equity is the thin slice on top of the fleet. The company had $248.1 million of availability under its asset-based facility at December 31, 2025, its 2029 Secured Notes run to April 15, 2029, and the facility itself to August 9, 2029. The recovery has roughly three years to show up in cash before the capital structure has to be renegotiated against whatever the numbers look like then.

Catalysts

First-quarter results landed on April 28, 2026, and the company reported record first-quarter revenue along with raised full-year 2026 guidance. The filed detail behind that print is the more useful part: the quarterly report attributes higher rental revenue to "higher fleet utilization of 3.7% for the three months ended March 31, 2026, driven by higher average OEC on rent of 11.8%". Utilization and the amount of fleet out on rent are the two levers that carry a rental recovery, and both moved together.

Two smaller items followed. In May the company was awarded a Sourcewell cooperative purchasing contract, which is the mechanism public agencies use to buy equipment without running their own tenders. Two brokers raised their price targets on the stock the same month. Neither changes the operating picture on its own, but the cooperative contract is the kind of channel that shows up in orders rather than in a press cycle.

The next scheduled report is August 3, 2026. The specific things to read in it are whether utilization kept climbing, whether average original equipment cost on rent grew again, and whether the guidance raised in April survived a second quarter. A rental recovery either compounds across consecutive quarters or it was a seasonal artifact, and one more print is what separates those two readings.

Peer Cohorts (Per Segment, With Filing Citations)

Equipment Rental Solutions (ERS) / Truck and Equipment Sales (TES) (reported)

• URI (United Rentals, Inc.)
• FY2025 10-K: …two reportable segments- general rentals and specialty. Segment financial information is presented in note 4 to our consolidated financial statements. The general rentals segment includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and…
• FY2025 10-K: …revenue reflects revenues from equipment that we rent from vendors and then rent to our customers. We account for such rentals as subleases. The accounting for re-rent revenue is the same as the accounting for owned equipment rentals described above. "Other" equipment rental revenue is primarily comprised of 1)…
• WSC (WILLSCOT HOLDINGS CORPORATION)
• FY2025 10-K: …expenditures incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing inventories to their existing location and condition. Rental Equipment Rental equipment is comprised of modular space and portable storage units held for rent or on rent to customers and…
• FY2025 10-K: …and solar solutions, telematics, connectivity and data solutions, security and protection products, entrance packages, electrical and lighting products, organization and space optimization assets, perimeter solutions and other items that improve the customer experience. We operate a hybrid in-house and outsourced…
• MGRC (McGRATH RENTCORP)
• FY2025 10-K: …requests. TRS-RenTelco's sophisticated in-house laboratory ensures the equipment is fully functional and meets its customers' delivery requirements. Service needs of TRS-RenTelco's customers are supported 24 hours a day, 7 days a week by its customer care specialists. TRS-RenTelco's goal is to provide service beyond…
• FY2025 10-K: …The Company also believes that the relative certainty of rental costs can facilitate cost control and be useful in the bidding of and pass-through of contract costs. Finally, renting rather than purchasing may better satisfy the customer's budgetary constraints. Rentals TRS-RenTelco rents electronic test equipment…

Aftermarket Parts and Services (APS) (reported)

• DXPE (DXP Enterprises, Inc.)
• FY2025 10-K: …representing firm orders for our IPS segment products that have been received and entered into our production systems, was $325.0 million and $292.2 million at December 31, 2025 and 2024, respectively. Supply Chain Services Our Supply Chain Services ("SCS") segment manages all or part of our customers' supply chains…
• FY2025 10-K: …Pumping Solutions ("IPS") segment provides integrated custom pump skid packages, pump remanufacturing, and manufactures branded private label pumps to meet the capital equipment needs of our global customer base. Our IPS segment also provides a comprehensive suite of products and services to the water and wastewater…
• AIT (APPLIED INDUSTRIAL TECHNOLOGIES, INC.)
• FY2025 10-K: …product fabrication and repair, and inventory management solutions. We also provide analysis and measurement of productivity improvement and cost savings potential from these services through our Applied Documented Value-Added ® (DVA ® ) reports. The segment includes operations focused on certain end markets and…
• FY2025 10-K: …as well as general maintenance products. We market our products with a set of service solutions including inventory management, engineering, design, assembly, repair, and systems integration, as well as customized mechanical, fabricated rubber, and shop services. Our customers use our products and services for both…
• GTES (Gates Industrial Corporation plc)
• FY2025 10-K: …and EMEA, where there are long-established aftermarket channels, approximately 73% of our Fiscal 2025 net sales, for both markets, were derived from these higher-margin aftermarket channels. Aftermarket. The majority of our sales are generated from customers in aftermarket channels, who primarily serve a large base…
• FY2025 10-K: …manufacturer of innovative, highly engineered power transmission and fluid power solutions. We offer a broad portfolio of products to diverse aftermarket channel customers, and to original equipment manufacturers ("OEM") as specified components, with the majority of our revenue coming from aftermarket channels. Our…
• DORM (Dorman Products, Inc.)
• FY2025 10-K: …powersports products built for the cool factor and designed with an edge. Gboost - Clutching products for specialty vehicles. GDP - Premium quality transmission, portals, differentials and more for UTVs and ATVs. We offer bumper-to-bumper aftermarket solutions covering everything from engine, undercar, steering and…
• FY2025 10-K: , approximately half of our sales of specialty vehicle parts constitute nondiscretionary repair parts. This sector consists of direct-to-consumer and direct-to-dealer channels through both retail and e-commerce platforms. Key purchasing decisions of customers in this sector include ease of ordering, ease of…
• GPC (GENUINE PARTS CO)
• FY2025 10-K: …across our two Automotive segments. Our Global Automotive network serves over one million commercial c ustomer locations. We have a diverse commercial customer base with no specific customer type representing an outsized concentration of our overall business. Our network operates in large and fragmented markets with…
• FY2025 10-K: …• Tools and diagnostic devices for repair and maintenance • Paint, body care, and collision repair supplies (in select markets) We believe we create value for our customers through: • Advanced inventory management using data analytics to ensure product availability where it's needed most • Extensive distribution…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.