From CNBC · Michael Khouw · · 2m
United Rentals looks cheap despite strong growth
Mike Khouw says the equipment rental company trades below its market value while growing faster than the S&P 500, making it a candidate for an options strategy.
In brief
Mike Khouw says the equipment rental company trades below its market value while growing faster than the S&P 500, making it a candidate for an options strategy. United Rentals trades at a below-market multiple despite compounding revenues and earnings faster than the S&P 500, prompting Mike Khouw to suggest a…
A personal discovery
Mike Khouw rented a compact track loader and bulldozer from United Rentals during maintenance work at his parents' New Hampshire property in late October two thousand twenty-six.
What United Rentals does
United Rentals quickly deploys heavy equipment to remote sites. The company trades on the New York Stock Exchange under the ticker URI.
The valuation disconnect
United Rentals trades at a below-market forward P-E multiple of roughly seventeen point three times forward estimates of sixty one dollars ten cents per share, and an EV-EBITDA multiple of eight point eight times nine…
Growth outpaces the market
United Rentals compounds revenues, earnings, and EBITDA at a noticeably faster clip than the cap-weighted S&P five hundred, yet trades at a discount to the broader market.
“Effectively, one can buy superior, market-beating growth at a discounted market multiple.”
Recent earnings confirm momentum
United Rentals delivered a beat and raise in third-quarter earnings, pointing to robust underlying demand across its end markets. Sell-side analysts are revising forward estimates upward.
Macro backdrop supports growth
A broader nonresidential construction recovery has driven improving and resilient rental rates. Infrastructure demand remains robust, though potential data center construction slowdown could become a future headwind.
The valuation risk
United Rentals trades roughly twenty to twenty-five percent above its five-year average multiple. Mean reversion back to historical levels of cheapness remains a downside risk.
The options strategy
With implied volatility at forty-two to forty-five percent, selling cash-covered puts offers a strategic entry.If the stock rises, puts expire worthless and you pocket premium.If it falls, you buy shares at a lower cost.
The wheel strategy option
If assigned shares from the put sale, you could write upside covered calls against them. This approach of entering a stock then writing covered calls if assigned is sometimes called the wheel strategy.
What matters most
United Rentals trades at a below-market multiple despite compounding revenues and earnings faster than the S&P 500, prompting Mike Khouw to suggest a cash-covered put strategy.
