Business
Since I’m a contributor to folk.com, friends and family often do me a favor and give me hot chips. They say: “Have you heard about? [the latest headline-grabbing thing]? You’d better find out because it’s going to be a big deal. ”
Many investors are trying to find the next big thing with their investments, and it’s possible to make a lot of money doing so. But mature businesses can also make big profits. And while there are very few “next big” stocks that actually do well, mature companies give investors a much higher probability of success.
Two such mature businesses are united rentals (New York Stock Exchange: URI) and waste management (NYSE:WM). Each specializes in equipment rental and garbage disposal. Investors are yawning at this boring business. But both have outperformed the returns. S&P500 There has been a huge difference over the past 10 years.
URI Total Return Level Depends on the data Y chart
Additionally, both United Rentals and Waste Management just released quarterly results, demonstrating once again that these are businesses that are here to stay for the long term.
Business 1. United Rentals
With more than 1,500 locations in North America, United Rentals is the market share leader in equipment rentals with 15% of the market. The company had $21 billion worth of equipment as of March. And by properly managing this vehicle, both for rental and sale, if necessary. free cash flow machine.
On April 24, United Rentals reported financial results for the first quarter of 2024. It generated free cash flow of $869 million during the quarter. This puts the company on track to generate $2.1 billion annually. If the company achieves its full-year goals, it will generate more than $10 billion in free cash flow in just five years.Not bad for a company that has Market capitalization $46 billion as of this writing.
United Rentals isn’t sitting on cash. Acquire other companies to expand market share. Most recently, in March, it acquired Yak Access, a company that makes roads more accessible, for $1.1 billion in cash.Managers also habitually buy back inventorythis partially explains why Earnings per share has reached an all-time high.
URI Diluted Average Number of Shares Outstanding (Quarterly) Depends on the data Y chart
United Rentals’ management hopes to generate revenue of about $15 billion in 2024. However, it expects to generate $20 billion in revenue by 2028. Therefore, there is still upside for investors who buy shares in this unstoppable business today.
Business 2. Waste management
Like United Rentals, Waste Management also reported its first quarter 2024 financial results on April 24th. And as always, the company’s revenue is up and its profits are hitting new records.
Waste management is competitive advantage. The company operates a variety of landfills and recycling plants, which require permits and are expensive to start. We also have very high customer retention rates, as trash removal and recycling are always needed services.
Waste Management is already generating significant free cash flow, with the company expecting at least $2 billion in 2024 alone. However, the company’s free cash flow is not at the level it should be. That’s because they are spending millions on projects to capture gas from landfills and convert it into usable fuel.
The waste management sector has already seen lower investment costs for this project and is expected to achieve higher profitability in the coming years. The company completed one of its landfill-to-natural gas projects in the first quarter and plans to bring four more facilities online this year. These facilities increase profits for companies by harvesting things that are already sitting in landfills.
Waste Management uses most of its profits to return money to shareholders. The company’s first quarter free cash flow was $714 million. In return, the company returned his $557 million to shareholders. dividend and stock buybacks. This shows that management is keen on delivering profits to shareholders.
Business A final note
I believe that both United Rentals and Waste Management are top companies with unstoppable competitive advantages that will keep them in business for years to come. That said, neither stock is necessarily a bargain at this point.
URI price to free cash flow Depends on the data Y chart
From a free cash flow perspective, Waste Management stock is clearly trading at an above-average price. On the other hand, looking at this chart, it appears that United Rentals is trading at a relatively cheap price. However, the average value fluctuates significantly due to some anomalies. United Rentals’ stock often trades at half its current valuation.
United Rentals and Waste Management is a great business and, as a result, a great stock to buy and hold for the long term. But neither is a timely opportunity. Therefore, it may be best to buy stocks gradually over time, as the price may return to a more normal valuation at some point.
Business Should you invest $1,000 in United Rentals now?
Before purchasing United Rentals stock, consider the following:
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when to think about it Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $525,806!*
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John Quast has no position in any of the stocks mentioned. The Motley Fool recommends waste management. The Motley Fool has Disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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