Financials
Financials in One Page
Sunbelt Rentals is a roughly $11 billion-revenue equipment-rental compounder that ran a fifteen-year boom from $1.3B in revenue (FY2010) to $10.9B (FY2024), pushed gross margins from textbook-rental levels to about 57% (cost-of-rental now disclosed separately from FY2024), and held a 23-25% operating margin through the cycle. The cyclical squeeze is visible: operating margin has compressed from a 26.1% FY2023 peak to roughly 19-22% across the last four quarters as fleet inflation outran rental rate growth, and FY2024 was the cleanest test of cash quality — free cash flow collapsed to $169M as capex peaked at $686M before bouncing to $1.7B in FY2025. The balance sheet is heavy but not stretched: about $8B of long-term debt against ~$5B EBITDA puts net leverage near 1.7x, well inside management's target band. With the stock at $75.46 (2026-05-21), SUNB trades at roughly 22x TTM earnings and ~8x EV/EBITDA — in line with United Rentals on EV/EBITDA, but with weaker recent FCF conversion. The single financial metric that matters most right now is operating margin recovery — the market is paying a normal-cycle multiple on what may still be a trough-cycle margin.
Revenue FY2025 ($M)
Operating Margin FY2025
Free Cash Flow FY2025 ($M)
Net Debt / EBITDA (x)
P/E (TTM)
Key terms used on this page. Operating margin = operating income ÷ revenue (how much of every rental dollar is left after running the business). Free cash flow (FCF) = operating cash flow minus capital expenditures (cash left after sustaining the fleet). Net debt / EBITDA = total debt minus cash, divided by earnings before interest, taxes, depreciation and amortization (a standard leverage gauge — banks watch ~3-4x for industrials). EV/EBITDA = enterprise value (equity + net debt) divided by EBITDA — the cleanest multiple for capital-intensive rental businesses because it normalizes for leverage and tax. ROIC = return on invested capital — pre-tax operating profit divided by debt plus equity.
Revenue, Margins, and Earnings Power
Equipment rental is a unit-economics story: SUNB buys yellow-iron assets, depreciates them over 5-10 years, and earns rent that should clear depreciation, branch cost, and finance cost with enough left over for a mid-teens operating margin. That is exactly what the numbers show across fifteen years of growth.
Revenue grew from $1.3B to $10.9B over fifteen years — a ~12% compound annual rate driven by a tripling of fleet size, the FY2017 NationsRent integration, and a wave of bolt-on acquisitions. Operating income scaled faster than revenue through FY2023 thanks to operating leverage on a fixed branch network. The FY2024-FY2025 plateau is the first hard test: revenue stopped compounding above 10% (FY2025 actually fell 0.6%) and operating income has been flat for three years. Whether that is "the cycle" or "structural mix shift" is the central financial question.
Margins tell the same shape: a steady climb from sub-10% operating (post-GFC) to a 27-28% peak in FY2016-FY2017, then a band of 24-27% through the cycle. FY2024 marked the first sustained step down — operating margin retreated nearly three percentage points from the FY2023 peak — and FY2025 did not recover it. With about 57% gross margin and ~14% SG&A intensity in the most recent quarters, the operating-margin compression is happening on the gross line: fleet inflation and lower utilization, not corporate bloat.
The most recent quarter (Q3 FY2026, calendar Q1 2026) shows operating margin slipping to 18.7%, the lowest non-Q4 mark since COVID's Q4 FY2020. Quarterly seasonality is real here — Q3 (Feb-Apr) is typically softer than Q1/Q2 — but the year-over-year compression vs. 20.7% in Q3 FY2025 is the signal worth watching. Verdict: earnings power is normalizing, not deteriorating, but it has not re-accelerated despite revenue still growing modestly.
Cash Flow and Earnings Quality
Equipment rental is a brutal cash-flow business: depreciation is real (machines wear out), and growth requires constant fleet outlays. The right way to read SUNB's cash is to compare net income, operating cash flow (OCF), and free cash flow (OCF minus capex) — the gap between them tells you how much of the headline earning is being reinvested into fleet vs. left over.
Two stories sit on top of each other. First, the long-cycle story: across FY2019-FY2025 the company converted roughly 70 cents of every dollar of net income into free cash flow — a respectable result for a fleet business. Second, the FY2024 anomaly: FCF cratered to $169M, only 11% of net income, because capex hit $686M while OCF fell to $855M as working capital and accounts receivable absorbed growth. FY2025 then snapped back hard — capex dropped to $456M and OCF rebounded to $2.2B, delivering $1.7B of FCF (a 16% FCF margin and 111% conversion).
The cash-allocation pattern is unmistakable: FY2024 was a "growth-capex + M&A" year; FY2025 swung sharply to a "harvest + buyback" year as management let the fleet age, slashed acquisitions to $147M (one-sixth of the prior year), and tripled buybacks. Earnings quality is solid on a multi-year average (FCF tracks net income), but reported FCF in any single year is dominated by fleet capex timing, which can swing $300M-$500M between years. Investors should normalize on a three-year-trailing FCF rather than the most recent print.
Balance Sheet and Financial Resilience
Equipment rental is asset-heavy by definition — the fleet is on the books. The right question is not whether SUNB carries debt (it does, like every rental peer) but whether the debt is small enough relative to the cash flow that funds it.
Debt and equity have grown in tandem, with debt rising from $4.9B (FY2019) to $8.0B (FY2024) while equity nearly doubled from $3.7B to $7.1B. That is healthy growth: the rental fleet (PP&E) doubled from $7.8B to $15.7B over the same period, so leverage versus the actual revenue-producing assets has fallen even as nominal debt has grown.
Net debt / EBITDA has improved from over 3x in FY2019-FY2020 to roughly 1.7x in the most recent year — comfortably inside management's stated 1.0-2.0x target band. The FY2020-FY2021 jump was COVID-driven (revenue softened while debt was already in place); the post-COVID build of equity and EBITDA has steadily walked the ratio down. Compared with peers (URI at ~1.7x, Herc Holdings near 5.4x net debt/EBITDA after the H&E acquisition), SUNB is on the conservative half of the rental complex.
One caveat on resilience. Total debt now sits near $8B against only $20-30M of cash on the balance sheet. SUNB therefore depends on revolving credit, asset-backed lines, and bond market access to fund the fleet, not a cash cushion. Interest expense at current rates (operating income $2.5B vs. interest expense disclosure of ~$400-450M) gives roughly 5-6x interest coverage — adequate, but a marked tightening from the near-zero-rate period. A sudden drop in EBITDA toward $3.5B would push net leverage above 2x and force capital-allocation choices.
Returns, Reinvestment, and Capital Allocation
This is where rental businesses earn (or lose) their multiple. The question is whether incremental capital — fleet expansion, bolt-on M&A — earns a return above the cost of that capital.
ROE peaked near 29% in FY2019 — high-cycle, modest balance sheet — and has settled into a 22-27% range. That is excellent for a capital-intensive business and clears any reasonable cost-of-equity hurdle (likely 9-10%). ROA in the 7-10% range against debt costs of roughly 5-6% means the fleet is still earning a positive spread on borrowed capital. The FY2024 step-down (ROE to 22.2%) reflects the same margin compression seen earlier — incremental capex went in, EBITDA did not yet follow.
The capital-allocation history reveals a clear regime shift between FY2024 and FY2025. The earlier years (FY2022-FY2024) were aggressive growth: fleet capex grew from $138M to $686M, and bolt-on acquisitions ran ~$1B per year on average. FY2025 marks the inflection — capex cut by a third, acquisitions slashed by 83%, dividends raised 25%, and the buyback ratcheted from $108M to $427M. That is the textbook playbook of a management team deciding the cycle has rolled over and that capital should return to shareholders rather than expand the fleet.
Share count has fallen from 480M (FY2019) to 418M (latest quarter) — roughly 13% reduction over seven years, or ~2% annualized buyback yield. Combined with a ~1% dividend yield, total shareholder yield runs ~3% — middle of the rental peer range (URI is closer to 3.5%; HRI under 0.5% after the H&E debt absorption). Verdict: management is allocating well, but only just. FY2024 acquisitions consumed cash that delivered little immediate margin lift, and the recent pivot to buybacks at a 22x P/E is fine — but not bargain-bin attractive.
Segment and Unit Economics
Detailed segment financials are not provided in this run's structured data. From the predecessor (Ashtead Group) disclosure structure, SUNB historically reports three operating segments: General Tool (~75% of rental revenue — earthmoving, aerial, material handling), Specialty (~20% — power, climate, scaffolding, trench, flooring), and Sunbelt Canada (~5%). Specialty has historically carried the higher rental rate and higher margin; that is where management has directed acquisitions and where the growth narrative for the next cycle is built.
Investors looking to break out segment unit economics should refer to the predecessor Ashtead Group plc FY2024-FY2025 annual reports (referenced in the company-disclosure files in this run), which provide segment EBITDA margins. As of the FY2024 disclosure: General Tool segment EBITDA margin was ~47%; Specialty was ~49%; Canada was ~42% — Specialty's slight edge masks materially higher growth.
Valuation and Market Expectations
The right question is not whether 22x earnings is "expensive" — it is whether 22x earnings on what may still be a cyclically depressed earnings number prices in a fair share of the recovery.
SUNB trades at a small discount to United Rentals on EV/EBITDA and a roughly comparable P/E, with materially stronger FCF yield in the most recent year (5.5% vs. URI's 1.3%). Note that URI's depressed FCF is the same story as SUNB's FY2024 — heavy fleet capex absorbed cash — so the right comparison is multi-year FCF rather than the single FY2025 print. On book value, SUNB at 4.5x sits in the middle: between URI (5.7x, premium for scale) and MGRC (2.1x, discount for sub-scale).
The bear/base/bull range above is illustrative, not a forecast: a recession-driven bear case takes revenue back to FY2023 levels and margins to a COVID-adjacent 20%, implying ~$50; the base case roughly matches today's market; the bull case (margins back to FY2023 peak and modest revenue growth) reaches $100+. The asymmetry is reasonable but not screaming: the stock has fallen from above $100 (predecessor AHT highs in late 2023) to $75 today, partly reflecting the FY2024-FY2025 margin compression. The open question is whether the next move is "back to peak" or "lower for longer."
Peer Financial Comparison
The peer table tells a clear story: SUNB has the best operating-margin and EBITDA-margin profile of any large rental peer (only McGrath, a sub-scale specialty operator, matches it), and the best FCF margin among the scale operators (URI's 4.1% reflects FY2025 capex intensity, not a structural deficit). Herc, WillScot, and CTOS all sit in margin/leverage corners that punish their multiples — HRI is being held together by the H&E deal-financing event; WSC and CTOS are in earnings restatement / impairment cycles that produce nonsensical P/E ratios.
The valuation gap deserved: on the most defensible metric — EV/EBITDA — SUNB at 8.1x trades at a modest discount to the URI/HRI/WSC range (9.1-11.8x), arguably justified by the most recent quarter's margin softness rather than any structural problem. The peer gap that matters: SUNB's discount to URI's EV/EBITDA (~1.0 turn) looks small given SUNB has higher EBITDA margins and lower leverage. That is either a market underweight on SUNB's quality, or a market correctly worried that the margin gap will close as URI executes on H&E synergies.
What to Watch in the Financials
The financials confirm SUNB's status as a high-quality compounder: long-cycle revenue growth above 10%, operating margin in the mid-20s, FCF that converts to cash over a multi-year window, and a balance sheet inside management's leverage band. The financials contradict the bullish "growth + compounding" narrative in one respect — the FY2024-FY2025 period proves that incremental capex (capex peaked at $686M, acquisitions ran $1B+ per year) did not translate into operating leverage; margins compressed and FCF collapsed in FY2024 before the FY2025 harvest.
The first financial metric to watch is operating margin in fiscal Q4 FY2026 (reporting late June 2026) — if the print lands above 22%, the FY2024-FY2025 compression was a transition-year story and the multiple-expansion case has support; if it stays at 19-20%, the case for a discount to URI's EBITDA multiple holds, and the next leg of capital allocation is more likely buybacks than fleet growth.