At the current price of $53, what are market expectations regarding Rush Enterprises’ future operating performance? Over the next 6 years, Rush Enterprises shares will need to reach $89 to achieve average annual stock market performance of 9.0%. To achieve Upper quartile performance, Rush Enterprises’ stock price will need to reach $104 by 2029.
Executive Summary
- Price Target Research identifies Rush Enterprises as having: very high profitability, high financial strength, above average expected growth, and instability. A big positive influence on Rush Enterprises’ valuation is its superior Growth.
- Very low valuation, average shareholder returns. Current valuation levels are very low relative to the Rush Enterprises Peer Group. Recent market returns have tracked the Rush Enterprises Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Rush Enterprises shares should reach a level of $114 by 2029 — an 14.8% per year total shareholder return. A 2029 stock price of $89 would reflect median performance and a price of $104 would be required to reach upper quartile performance.
- Growth has been Rush Enterprises’ biggest valuation strength. Historical growth has been very high relative to the Rush Enterprises Peer Group and forecasted growth is relatively high. Revenue Growth, Asset Growth, and Equity Growth have been superior. These factors have buoyed market perceptions of Rush Enterprises. Rush Enterprises’ historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth and return on equity has been stable. Rush Enterprises’ consensus growth expectations are higher than historical growth.
- Pretax ROA, Return on Equity, and Pretax Margin are group leading. These factors have strengthened market perceptions of Rush Enterprises. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- Rush Enterprises’ risk profile is neutral. Overall variability has been only average with only average revenue variability, very high E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively very high and earnings’ expectations are below average. The debt/capital ratio has been relatively steady.
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