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Bear of the Day: Hertz Global (HTZ)

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Hertz Global ((HTZ - Free Report) ) business has been stagnant over the last three years, and its stock price has plunged 84% during that time. While the company is a well-known name in the rental car industry, it continues to face significant headwinds. The earnings revision trend has turned sharply negative, and despite a valuation that might catch the eye of some bargain hunters, the broader picture remains concerning.

In addition to stagnant sales growth, Hertz Global also has negative earnings and faces stiff competition in the rental car market. In this article we will cover the reasons why investors should avoid Hertz Global Stock.

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Falling Sales and Earnings Estimates

Hertz Global currently has a Zacks Rank #5 (Strong Sell) rating, reflecting downward trending earnings revisions and dimming the stock’s outlook. Analysts have unanimously lowered earnings estimates across timeframes by hefty margins.

Beyond the earnings revisions, Hertz Global has struggled with flat to declining sales growth over the last five years. Additionally, despite efforts to rebuild the business, the company remains in negative earnings territory, a troubling sign for investors.

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Hertz Stock Appears Cheap 

One noteworthy point is that Hertz is expecting sales of nearly $10 billion next year, while its current market capitalization is just $800 million. This gives the stock an incredibly low forward price-to-sales ratio of 0.1x, which is very cheap by any standard. However, despite this attractive valuation metric, the company has yet to show any material profits, which is critical for turning sentiment around.

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Should Investors Avoid Hertz Global Stock?

While Hertz may appear undervalued from a sales perspective, the company’s declining earnings revisions, negative earnings history, and significant stock price drop make it a risky bet at this time. Until Hertz can demonstrate a turnaround in profitability or its Zacks Rank moves higher, investors would be wise to avoid the stock and look for better opportunities elsewhere.


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