HERC HOLDINGS INC. (HRI): what the price assumes

In the published model solve dated 2026-Q2, anchored at $168.49, HERC HOLDINGS INC. (HRI) is priced for today's economics sustained for ~8.0 years. 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 2026-06-27.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/HRI

Headline

What The Price Assumes (Inversion)

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

Solve inputs: computed at a 7% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.6 years (computed at the 7% minimum rate; the CAPM rate 6% sits below it).

Reconcile: at the x-ray's 9.3% required return this reads ~13.3 years; the models below use their own rates.

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

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 justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.9%); the inversion above states its own rate.

Per-Model Detail (n=12)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

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

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 3.9%); the trailing year was depressed.

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

Bullet Takeaways

• Herc rents construction and industrial equipment from a branch network that just grew about 30% overnight through the H&E Equipment Services acquisition, turning a regional player into one of the two or three largest fleets in North America.
• The single biggest risk is the debt taken on to get there: net borrowings of roughly $7.9 billion now sit against an operating-income base that swings hard with the construction cycle, and a downturn would press both rental rates and the cash available to service that debt.
• Watch the H&E synergy ramp toward the affirmed $125 million cost target by the end of 2026 and the next rental-rate read; the integration is what has to convert the larger fleet into the margin the price is paying for.

Bull Case

Equipment rental is a business that rewards scale in ways the income statement hides for a year or two after a deal. A larger fleet buys better from manufacturers, fills more of its branches from the same overhead, and can chase the kind of multi-year mega-projects that a regional operator simply cannot serve. Herc's bull case is that the H&E acquisition just bought it that scale wholesale. The integration is complete, the network is about 30% larger, and management has reaffirmed a target of $125 million in total cost synergies by the end of 2026. Most service businesses do not get to add a third of their footprint and a national mega-project capability in a single move.

The recent operating data shows the larger fleet already pulling its weight on the top line. First-quarter equipment-rental revenue reached $981 million, up 33% from $739 million a year earlier, driven by the bigger fleet and higher volume on large construction projects, with adjusted EBITDA up 33% to $448 million at a 39.3% margin. A rental business converts revenue to EBITDA at high rates because the fleet is already bought and paid for; the incremental dollar of rental on an owned excavator drops most of the way to operating cash flow. That is why the company affirmed full-year 2026 guidance of $4.275 billion to $4.4 billion in equipment-rental revenue and $2.0 billion to $2.1 billion in adjusted EBITDA.

The moat is mundane and real: the fleet is the barrier. Rental equipment sits on the books at cost net of discounts and is the company's largest asset, and a fleet of that depth cannot be assembled cheaply by a new entrant. The same disclosure that warns of residual-value risk on used gear, that the company "incur[s] maintenance and repair costs associated with our rental fleet", is also a description of the capital wall a competitor would have to climb. Book value sits near $57 a share, and the asset-value methods anchor close to that figure. The bull point is that demonstrated book is real, owned, depreciating steel, not goodwill, and the cash the fleet throws off funds both the dividend and the deleveraging that the next two years are about.

Bear Case

The advantage Herc just bought is the same advantage its largest competitors already have, often at greater scale. Equipment rental concentrates around a handful of national fleets, and the company says so plainly: it faces "intense competition, including from our own suppliers, that may lead to downward pricing or an inability to increase prices", in markets where "competitive factors in our industry include price competition". The H&E deal narrows the gap to the leaders; it does not open one. When the cycle turns and utilization slips, every national fleet discounts at once, and the operator carrying the most debt has the least room to hold price.

That debt is the structural problem the price has to look past. Herc funded the acquisition by issuing the 2030 Notes and 2033 Notes, a new Term Loan, and refinancing its asset-based revolver, leaving net borrowings of roughly $7.9 billion against a mid-cycle operating-income base. On that base, net debt runs in the mid-40s as a multiple of pre-tax operating income, a level that is only comfortable while construction demand and rental rates hold. Trailing operating income was actually negative, at about negative $39 million, because GAAP earnings absorbed the integration; the first quarter itself printed a net loss of $24 million, or $0.72 per diluted share. The reported loss reflects the cycle and the deal, not a permanent state, but it is also a reminder of how thin the GAAP cushion is when a leveraged fleet hits a soft patch.

The valuation methods split along this fault line. On asset value and on earnings power, today's price sits well above where the methods land; the price is roughly three times the book-value-plus-profitability anchor and far above what current cash earnings capitalize to. Only the revenue-multiple and forward-growth lenses reach the price, and they reach it by crediting the larger post-acquisition revenue base growing into the synergy target. The bet is narrow: it is that the H&E integration delivers the promised margin and the cycle cooperates long enough to deleverage. Customer relationships do not make that automatic. The filing notes that customers "do not obligate them to rent equipment from us" and that past revenue from significant customers "may not continue in future periods". The fleet is owned; the demand is rented quarter to quarter.

Valuation

Start with what the price is paying for. On the company's through-the-cycle margins rather than the depressed trailing quarter, today's price works out to a very high multiple of normalized operating income, the kind of figure that only makes sense if operating profit compounds at its self-funding ceiling for the better part of a decade. Trailing earnings are negative because the H&E integration ran through the income statement, so the inversion uses Herc's own mid-cycle margin near 4% on current revenue rather than the trough. Even on that normalized base, the embedded assumption is demanding, and history is not kind to it: of comparable fast-growers, only about 18% sustained that kind of pace for the eight-plus years the price implies. Read that figure as a direction, not a measurement, but the direction is clear. The price leans on the acquisition working.

The disagreement among the methods is the more useful read. The asset-value lens, built on the roughly $57 book value of owned fleet, lands far below the price; the earnings-power lens, capitalizing current cash earnings with no growth, lands below it too. Only the revenue-multiple comparison to the broader sector and the forward-growth methods reach today's level, and they get there by valuing the enlarged revenue base at a sector price-to-sales multiple and by crediting the recent growth rate forward. Value methods saying expensive while only the growth and revenue lenses reach is the signature of a price betting on the deal converting scale into sustained margin, not on what the steel is worth today.

Solvency is where the bet's downside lives. Net borrowings of about $7.9 billion against roughly $43 million of liquid assets is a balance sheet that is fine while the fleet stays busy and uncomfortable if it does not; the company's own filing frames its liquidity through a revolving facility "of up to $3.5 billion (subject to availability under a borrowing base)" rather than through cash on hand. Free cash flow turned positive at $94 million in the first quarter, and the share count has crept up only modestly, so this is not a company burning through capital. The valuation rests less on any single multiple than on whether the next two years let the larger fleet deleverage on schedule.

Catalysts

The defining near-term event is the H&E integration converting into reported margin. Management says the integration is complete, the network has grown by roughly 30% of branches, and the $125 million cost-synergy target for the end of 2026 has been reaffirmed. Each quarter from here is a test of whether those synergies show up in EBITDA at the guided rate; the company affirmed full-year 2026 equipment-rental revenue of $4.275 billion to $4.4 billion and adjusted EBITDA of $2.0 billion to $2.1 billion, so the bar is set publicly.

The cycle is the other catalyst, and it cuts both ways. Rental-revenue growth of 33% in the first quarter leaned on volume from large construction and infrastructure projects, which means the read-through to watch is whether mega-project demand stays firm and whether rental rates hold as the enlarged industry fleet competes for the same jobs. Net rental capex guidance of $500 million to $800 million for 2026 signals how much fleet the company plans to add; a pullback there would be the first visible sign management sees demand softening. The next earnings print, with a clean quarter of combined operations, is where the synergy ramp and the rate environment both become legible.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• ATO (ATMOS ENERGY CORP)
• FY2025 10-K: …equipment. The principal means to compete against 12 Table of Contents alternative fuels is lower prices, and natural gas historically has maintained its price advantage in the residential, commercial, and industrial markets. Our pipeline and storage operations have historically faced competition from other existing…
• FY2025 10-K: …and commercial revenues. Additionally, higher gas costs may require us to increase borrowings under our credit facilities, resulting in higher interest expense. Finally, higher gas costs, as well as competitive factors in the industry and general economic conditions may cause customers to conserve or, in the case of…
• MLCO (MELCO RESORTS & ENTERTAINMENT LIMITED)
• FY2025 20-F: …management personnel. We may experience changes in our key management in the future, including for reasons beyond our control. The loss of Mr. Lawrence Ho's services or the services of the other members of our board of directors or key management personnel could hinder our ability to effectively manage our business…
• FY2025 20-F: …balance sheet date, which are based on the prevailing exchange rate on the applicable balance sheet date. PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. 12 Table of Contents ITEM 3. KEY INFORMATION A. [RESERVED] B.…
• IHG (IHG)
• FY2025 20-F: …Statements, and excludes revenue and operating loss from insurance activities of $27m and $9m, respectively. 254 IHG Annual Report and Form 20-F 2025 Other Financial Information continued Fee margin reconciliation continued c. Year ended 31 December 2024 Americas EMEAA Greater China Central b Total Revenue $m…
• FY2025 20-F: …increased by $2m to $834m , including a $2m exceptional cost in relation to the global efficiency programme, compared to an exceptional income of $4m in the prior year. Operating profit from the reportable segment a increased by $8m ( 1.0% ) to $836m . Revenue and operating profit from the reportable segment a are…
• PACS (PACS Group, Inc.)
• FY2025 10-K: …industry is highly competitive. Our skilled nursing facilities compete primarily on a local and regional basis with other skilled nursing facilities and with assisted/senior living facilities, from national and regional chains to smaller providers owning as few as a single facility. Competitors include other…
• FY2025 10-K: …for routine capital expenditures at our facilities to keep them competitive in their respective markets, to the extent that competitive forces cause those expenditures to increase in the future, our financial condition may be negatively affected. Our policy is to comply with laws prohibiting kickbacks and referral…
• ENSG (ENSIGN GROUP, INC)
• FY2025 10-K: …services at lower prices than we offer. 9 Table of Contents Our other services, such as senior living facilities and other ancillary services, also compete with local, regional, and national companies. The primary competitive factors in these businesses are similar to those for our skilled nursing facilities and…
• FY2025 10-K: …of each location. We believe that the primary competitive factors in the post-acute care industry are: • ability to attract and to retain qualified management and caregivers; • reputation and achievements of quality healthcare outcomes; • attractiveness and location of facilities; • the expertise and commitment of…
• TPC (TPC)
• FY2025 10-K: …judgments and settlements that totaled $57.2 million in 2024, including $17.7 million due to an unfavorable judgment on a completed mass-transit project in California and certain other adjustments that were individually immaterial. Operating margin was (0.9)% in 2025 compared to (17.5)% in 2024. The change in…
• FY2025 10-K: …The cancellation or reduction in scope of significant projects included in our backlog could have a material adverse effect on our financial condition, results of operations and cash flows. Competition for new project awards is intense, and our failure to compete effectively could reduce our market share and profits.…
• RYZ (Ryerson Holding Corp)
• FY2025 10-K: …leverage with suppliers as we buy larger quantities of metals inventories. Gross profit. Gross profit is the difference between net sales and the cost of materials sold. Our sales prices to our customers are subject to market competition. Achieving acceptable levels of gross profit is dependent on our acquiring…
• FY2025 10-K: .S., Canada, or any other major world economy, or a segment of any such economy, could negatively impact our sales growth and results of operations. The metals services business is very competitive and increased competition has and could reduce our revenues and gross margins. We face competition in all markets we…
• ECG (Everus Construction Group, Inc.)
• FY2025 10-K: …margin expansion of 15.3% for the year ended December 31, 2025, compared to 14.6% for the year ended December 31, 2024. Operating income was also impacted by higher selling, general and administrative expenses, primarily including increased labor and professional-related expenses of $0.8 million and $0.5 million,…
• FY2025 10-K: …71% of total contract revenues with 6.7% operating income margin, and T&D segment revenues generated approximately 29% of total contract revenues with 10.2% operating income margin. We also allocate general corporate overhead costs that we chose not to allocate directly to E&M or T&D to Corporate and Other as these…

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.