- Equipment rentals giant generates the bulk of its sales and profits in the USA
- Stock already trades in line with major US rival
- Ashtead is the twenty-fifth biggest stock in the FTSE 100 and the index’s fourth-best performer over the past decade
“Ashtead is the twenty-fifth biggest company in the FTSE 100, as measured by its stock market valuation of £24.5 billion, so no-one will want to see the company switch its listing to New York, especially as the firm is just one of eighteen in the UK’s elite index that can point to a record of growing its dividend every year for at least a decade,” says AJ Bell investment director Russ Mould. “If there is any consolation for the London Stock Exchange, and investors in the UK equity market, Ashtead is unlikely to be leaving because its shares are too cheap relative to its US-quoted peers and rivals for reasons that relate directly to the business rather than optics or the share price.
“There are many good reasons why firms might like to switch their listing from London to another international arena such as the USA. They may have a lot of staff there and incentivising them with US-listed shares or options on them could be simpler for a host of reasons, including tax and currencies. They may wish to have US-listed stock available to them as a currency for making acquisitions. And they may simply have a substantial portion of their business there. This is very definitely the case with Ashtead, which, according to March’s third-quarter trading statement for the fiscal year to April, generates more than 80% of its sales and more than 90% of its earnings Stateside.
Source: Company accounts. Fiscal year to April 2024.
“This may soften the blow if Ashtead does indeed make the switch, if only a little – the firm is the fourth-best performer within the current crop of FTSE 100 members based on capital returns, so the company clearly has a big fan club.
Source: Sharepad, LSEG Datastream data.
“However, at least London investors can console themselves with the knowledge that Ashtead’s management is not moving on the grounds that they do not understand the company or that its shares are too cheap. Ashtead trades on very similar valuation multiples to those afforded to its main American comparator, United Rentals.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts, LSEG Datastream data, for next full fiscal year (2024-25E for Ashtead, 2024E for United Rentals).
Source: Company accounts, Marketscreener, analysts’ consensus forecasts, LSEG Datastream data, for next full fiscal year (2024-25E for Ashtead, 2024E for United Rentals).
“This is also encouraging for those investors who will stick with Ashtead should it make the switch. Management presumably feels the change is appropriate for good, sound business reasons, not just because they feel the share price is too low. No company boardroom ever feels the shares of the company for which it is responsible are too expensive and ultimately it is the job of the CEO, CFO and the board to manage the assets to best effect, to get the best risk-adjusted returns, and not to manage the share price. If they manage the assets well the share price should, over time, take care of itself, if the trajectory followed by Ashtead’s shares over the past decade or more is any guide, as the company’s valuation has responded very favourably to how it has used select, bolt-on acquisitions to add to the strong organic momentum in the business.
Source: LSEG Datastream data.
“All eyes will now turn to Ashtead’s fourth-quarter and full-year results that are due on Tuesday 18 June.”
