Rental Car Industry in Charts: Never Mind Zipcar – Look at Dollar Thrifty Automotive
Little Zipcar (ZIP) has gotten all the attention in the car rental industry of late, known as a game-changer for eliminating the rental agent and bringing its fleet of little cool cars direct to your hipster urban neighborhood. Great service, and very likely not such a great business, as YCharts reported earlier.
For investors, it may be that the current business model is just fine for the car rental industry – someone just needs to actually execute the model with rigor and discipline. Enterprise, the industry leader, might be doing that but it’s a moot point to investors because the company is privately-held. Too bad.
But dowdy little Dollar Thrifty Automotive Group (DTG) has lapped the car-rental field during the current economic rebound, and it’s making Hertz (HTZ) and Avis Budget (CAR), look slow-footed, as seen in this revealing stock chart.
What’s the market rewarding Dollar Thrifty for? Making money, as seen in its superior profit margin.
Apparently, economies of scale – at least, as practiced at Hertz and Avis – don’t mean much.
Car rental is capital intensive, and in addition to attracting rental customers to maintain a high utilization of fleet, a company has to buy and sell the jalopies with some skill. Otherwise, your return on invested capital will suck, and you're nothing more than a sap for the likes of General Motors (GM), Ford (F) and Toyota (TM), in their quest to boost auto sales.
Dollar Thrifty stock has already had quite a run and it’s PE ratio is now about 15, based on trailing earnings, which is high for a car rental outfit (when they have some earnings to compare to price). So it’s a bit pricey. And one would want to give its 10-K and such a thorough going-over before diving in. But it’s a company worth watching, as it’s making the competition look terrible.
Filed under: Company Analysis