Ashtead Is Betting on Growth To Continue After Strong Full-Year Results; Shares Fairly Valued

No-moat Ashtead Group’s full-year results slightly beat our expectations, delivering revenue and EBITDA growth of 19% and 18%, respectively. Ashtead has benefited from supply chain constraints, which has resulted in customers opting to rent rather than purchase equipment, supporting rental revenue growth of 22% in the current financial year. Full-year rental revenue guidance of growth between 12% and 14% is slightly weaker than we had anticipated. The group is betting that robust demand will continue despite economic uncertainty, by investing roughly $3.45 billion in the current year largely to expand its rental fleet and satisfy anticipated demand. As a result, free cash flow is expected to decline to roughly $300 million in the current financial year from $1.1 billion. We don’t expect to make meaningful changes to our estimates and reiterate our GBX 4,000 fair value estimate. Shares are fairly valued.