Hertz Global (NASDAQ:HTZ) stock doubled in just two days following the disclosure of a $46.5 million stake by Bill Ackman’s Pershing Square Holdings. This jump is interesting, especially considering that activist investors often aim to drive significant improvements in targeted companies. However, this raises a critical question: do Hertz’s fundamentals support such a large move, and is HTZ stock a buy now? We believe it is not.
Despite its seemingly low valuation, we find HTZ stock risky and unattractive at its current price of around $8. Our conclusion is based on an analysis comparing the stock’s current valuation with the company’s operating performance over recent years and its current and historical financial condition. This evaluation, across key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience, reveals very weak operating performance and financial health for Hertz Global.That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Hertz Global’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, HTZ stock looks cheap compared to the broader market.
- Hertz Global has a price-to-sales (P/S) ratio of 0.3 vs. a figure of 2.8 for the S&P 500
- Since Hertz Global reported an operating loss of $1.2 billion in the last twelve months, it currently has a negative P/EBIT ratio, vs. 21 for the benchmark S&P 500
How Have Hertz Global’s Revenues Grown Over Recent Years?
Hertz Global’s Revenues have declined marginally over recent years.
- Hertz Global has seen its top line grow at an average rate of 7.6% over the last 3 years (vs. increase of 6.2% for S&P 500)
- Its revenues have decreased 3.4% from $9.4 Bil to $9.0 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
- Also, its quarterly revenues declined 6.6% to $2.0 Bil in the most recent quarter from $2.2 Bil a year ago (vs. 4.9% improvement for S&P 500)
How Profitable Is Hertz Global?
Hertz Global’s profit margins are much worse than most companies in the Trefis coverage universe.
- Hertz Global’s Operating Income over the last four quarters was $-1.2 Bil, which represents a very poor Operating Margin of -13.4% (vs. 13.1% for S&P 500)
- However, the company’s Operating Cash Flow (OCF) over this period was $2.2 Bil, pointing to a good OCF-to-Sales Ratio of 25% (vs. 15.7% for S&P 500)
Does Hertz Global Look Financially Stable?
Hertz Global’s balance sheet looks very weak.
- Hertz Global’s Debt figure was $18 Bil at the end of the most recent quarter, while its market capitalization is $2.5 Bil (as of 4/17/2025). This implies a very poor Debt-to-Equity Ratio of 726% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $592 Mil of the $22 Bil in Total Assets for Hertz Global. This yields a poor Cash-to-Assets Ratio of 2.7% (vs. 15.0% for S&P 500)
How Resilient Is HTZ Stock During A Downturn?
HTZ stock has fared much worse than the benchmark S&P 500 index during the recent 2022 economic downturn. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- HTZ stock fell 40.6% from a high of $24.75 on 3 January 2022 to $14.69 on 22 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $19.94 on 16 February 2023 and currently trades at around $8.20
Putting All The Pieces Together: What It Means For HTZ Stock
In summary, Hertz Global’s performance across the parameters detailed above are as follows:
- Growth: Neutral
- Profitability: Very Weak
- Financial Stability: Extremely Weak
- Downturn Resilience: Extremely Weak
- Overall: Very Weak
Looking ahead, Hertz faces significant challenges that reinforce our view that the stock is unattractive, despite its low valuation. The company is expected to achieve only low-single-digit average sales growth over the next three years and is projected to remain in a loss position this year. Analyst sentiment is also notably bearish, with an average price estimate of just $3 per share – a significant discount of over 60% from the current $8 price. These factors, combined with the company’s very weak performance across key fundamental parameters, solidify our conclusion that HTZ is not a good stock to buy now.
While you would do well to avoid HTZ stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
Invest with Trefis
Market Beating Portfolios | Rules-Based Wealth
Read the full article here
