United Rentals, Inc.URINYSE
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DCF Valuation
DCF Valuation Summary
Buy
Fair Value: $1,022.17 per share(market-calibrated)
+24.6%
Upside to Fair Value
Current
$820.58
Pure Model
$1,017.45
Fair Value
$1,022.17
Bull Case
$1,310.31
Bear Case
$745.57
Market Reality Check
Model Terminal Growth
2.25%
Market-Implied Growth
2.67%
Calibrated Growth
2.35%
Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $1,017.45.
What's Driving This Ratingfor URI
↓
CapEx normalizing toward maintenance
Historical CapEx is 24.37% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$4.9B in annual FCF. This is the biggest driver of long-term cash flow improvement.
✓
Premium margins already priced in
EBIT margin of 26.30% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.
→
Moderate revenue growth
Analyst consensus projects 6.31% revenue growth, fading to 2.25% by Year 10. Revenue reaches $23.6B (vs $16.1B today).
↔
Perpetuity and exit methods disagree
Perpetuity growth gives $781.15/share (13.5x terminal FCF) while exit multiple gives $1,253.74/share (23.7x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.
✓
Model and market roughly agree
Market-implied terminal growth of 2.67% is close to the model's 2.25% (only 42bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 75.81% indicates efficient cash generation. FCF reaches $7.6B by Year 10 (32.17% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.68
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)12.04%
Cost of Debt
Pre-tax Cost of Debt3.53%
Tax Rate25.28%
After-tax Cost of Debt2.64%
Equity Weight (E/V)76.23%
Debt Weight (D/V)23.77%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (76.23% × 12.04%) + (23.77% × 2.64%)
= 9.81%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $17.1B | $19.7B | $21.1B | $22.1B | $23.6B |
| EBIT | $4.5B | $5.2B | $5.6B | $5.8B | $6.2B |
| Tax | $1.1B | $1.3B | $1.4B | $1.5B | $1.6B |
| NOPAT | $3.4B | $3.9B | $4.1B | $4.3B | $4.6B |
| + Depreciation | $2.8B | $3.2B | $3.4B | $3.6B | $3.8B |
| - Capex | $4.2B | $3.9B | $3.2B | $2.3B | $826M |
| - Δ NWC | $54M | $72M | $24M | $26M | $27M |
| Free Cash Flow | $1.9B | $3.1B | $4.3B | $5.6B | $7.6B |
| Discount Factor | 0.911 | 0.755 | 0.626 | 0.519 | 0.392 |
| Present Value | $1.7B | $2.3B | $2.7B | $2.9B | $3.0B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$7.6B
Terminal Growth Rate2.25%
WACC9.81%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$102.8B
PV of Terminal Value$40.3B
Exit Multiple Method
Year 10 EBITDA$10.0B
Exit Multiple (EV/EBITDA)18.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$180.3B
PV of Terminal Value$70.8B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$26.0B
PV of Terminal Value$40.3B
Enterprise Value$66.3B
(-) Net Debt$16.0B
Equity Value$50.3B
Shares Outstanding64M
Price per Share$781.15
Exit Multiple Method
PV of Projected FCFs$26.0B
PV of Terminal Value$70.8B
Enterprise Value$96.8B
(-) Net Debt$16.0B
Equity Value$80.7B
Shares Outstanding64M
Price per Share$1,253.74
Pure Model Fair Value
$1,017.45
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 1.25% | 1.75% | 2.25% | 2.75% | 3.25% |
|---|---|---|---|---|---|
| 7.81% | $1,291.60 | $1,329.33 | $1,373.86 | $1,427.19 | $1,492.22 |
| 8.81% | $1,119.32 | $1,145.18 | $1,174.98 | $1,209.71 | $1,250.68 |
| 9.81% | $978.16 | $996.59 | $1,017.45 | $1,041.26 | $1,068.71 |
| 10.81% | $859.69 | $873.21 | $888.32 | $905.30 | $924.52 |
| 11.81% | $758.47 | $768.64 | $779.87 | $792.35 | $806.28 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$745.57
-9.1% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 2.09
Base Case
$1,017.45
24.0% vs current
- • Analyst consensus
- • Terminal growth: 2.3%
- • Beta: 1.68
Bull Case
$1,310.31
59.7% vs current
- • +25% vs analyst consensus
- • Terminal growth: 2.8%
- • Beta: 1.42
Key Assumptions & Drivers• Industrials Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth6.31%
Year 3 Revenue Growth7.47%
Year 5 Revenue Growth2.25%
Year 7 Revenue Growth2.25%
Year 10 Revenue Growth2.25%
Terminal Growth Rate2.25%
Margin & Efficiency
Current EBIT Margin26.30%
Tax Rate25.28%
Historical Capex / Rev24.37%
Terminal Capex / Rev3.50%
NWC / Revenue5.27%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.