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Is CAR Stock Worth Buying Despite Weak Liquidity and High Valuation?
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Key Takeaways
CAR's profits improved as lower fleet costs, tighter expenses and higher utilization offset soft demand.
Weak liquidity, 7.4X net leverage and a premium forward valuation cloud the near-term investment case.
Flat pricing, falling rental days and downward estimate revisions support waiting for clearer revenue growth.
Avis Budget Group, Inc. (CAR - Free Report) offers investors a difficult trade-off. Better fleet utilization, lower fleet costs and tighter expense control are lifting profitability even as demand remains soft.
The balance sheet and earnings outlook are harder to overlook. Weak liquidity, high leverage, demanding forward valuation and downward estimate revisions favor patience rather than an aggressive entry.
CAR’s Valuation Sends Mixed Signals
CAR’s trailing enterprise-value-to-EBITDA multiple of 5.46 times compares favorably with higher multiples for its sub-industry, the transportation sector and the S&P 500. On that measure, the shares look discounted relative to several benchmarks.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
The picture changes on forward earnings. CAR’s forward price-to-earnings multiple stands above both industry and broader market levels, suggesting investors are paying a premium despite a pressured earnings outlook. The split between the two metrics limits the strength of the value argument.
Avis Budget’s Profitability Is Improving
Second-quarter 2026 adjusted EBITDA increased 3% year over year to $286 million, while consolidated net income rose more than twelvefold to $63 million from $5 million. The improvement came even as revenues declined 1% to about $3 billion.
Vehicle depreciation and lease charges fell to $583 million from $636 million, while selling, general and administrative expenses declined to $385 million from $396 million. Global utilization improved 1.9 percentage points to 72.6%, showing that a smaller fleet and tighter operating discipline are improving transaction economics.
CAR Still Faces Execution and Balance-Sheet Risk
CAR had $2.51 billion of current assets against $3.10 billion of current liabilities at June 30, 2026, producing a current ratio of about 0.81. Available liquidity exceeded $1 billion, but net corporate leverage remained elevated at 7.4X. The company also did not declare or pay cash dividends in 2025 or 2024.
Vehicle interest expense rose to $232 million from $229 million in the quarter. Lower used-vehicle resale values could increase depreciation and weaken fleet economics, while high debt leaves less room for operating setbacks. Hertz Global Holdings, Inc. (HTZ - Free Report) , a direct rental-car peer, is also broadening its mobility strategy through fleet partnerships, underscoring how capital needs are evolving across the industry.
Can Avis Budget Turn Efficiency Into Growth?
The main question is whether better execution can produce durable revenue growth. Total rental days declined 2% in the second quarter, while revenue per day was nearly flat excluding currency effects. Management expects third-quarter revenue per day to remain roughly flat, with a smaller fleet and higher utilization again shaping results.
Recovering travel demand and projected expansion in the North American rental market could provide support, but current trends do not yet confirm a broad rebound. Uber Technologies, Inc. (UBER - Free Report) remains relevant to the mobility landscape as it expands autonomous-vehicle partnerships, including fleet operations with Hertz. CAR’s Waymo partnership may create another avenue for growth, though the near-term investment case still depends on core rental demand.
CAR’s Style Scores Do Not Erase Near-Term Caution
The bottom line is that operational progress is real, but it has not removed the risks tied to liquidity, leverage, demand and valuation. Waiting for clearer revenue momentum and balance-sheet improvement looks more prudent than buying solely on recent efficiency gains.
CAR currently carries a Zacks Rank #5 (Strong Sell).
Its Value Score of A and Growth Score of B point to favorable characteristics in those styles, but Style Scores are designed to complement the Zacks Rank, not override it. A Momentum Score of D and steep downward earnings-estimate revisions reinforce the near-term caution.
View the Zacks #1 Rank List
Image: Shutterstock
Is CAR Stock Worth Buying Despite Weak Liquidity and High Valuation?
Key Takeaways
Avis Budget Group, Inc. (CAR - Free Report) offers investors a difficult trade-off. Better fleet utilization, lower fleet costs and tighter expense control are lifting profitability even as demand remains soft.
The balance sheet and earnings outlook are harder to overlook. Weak liquidity, high leverage, demanding forward valuation and downward estimate revisions favor patience rather than an aggressive entry.
CAR’s Valuation Sends Mixed Signals
CAR’s trailing enterprise-value-to-EBITDA multiple of 5.46 times compares favorably with higher multiples for its sub-industry, the transportation sector and the S&P 500. On that measure, the shares look discounted relative to several benchmarks.
The picture changes on forward earnings. CAR’s forward price-to-earnings multiple stands above both industry and broader market levels, suggesting investors are paying a premium despite a pressured earnings outlook. The split between the two metrics limits the strength of the value argument.
Avis Budget’s Profitability Is Improving
Second-quarter 2026 adjusted EBITDA increased 3% year over year to $286 million, while consolidated net income rose more than twelvefold to $63 million from $5 million. The improvement came even as revenues declined 1% to about $3 billion.
Vehicle depreciation and lease charges fell to $583 million from $636 million, while selling, general and administrative expenses declined to $385 million from $396 million. Global utilization improved 1.9 percentage points to 72.6%, showing that a smaller fleet and tighter operating discipline are improving transaction economics.
CAR Still Faces Execution and Balance-Sheet Risk
CAR had $2.51 billion of current assets against $3.10 billion of current liabilities at June 30, 2026, producing a current ratio of about 0.81. Available liquidity exceeded $1 billion, but net corporate leverage remained elevated at 7.4X. The company also did not declare or pay cash dividends in 2025 or 2024.
Vehicle interest expense rose to $232 million from $229 million in the quarter. Lower used-vehicle resale values could increase depreciation and weaken fleet economics, while high debt leaves less room for operating setbacks. Hertz Global Holdings, Inc. (HTZ - Free Report) , a direct rental-car peer, is also broadening its mobility strategy through fleet partnerships, underscoring how capital needs are evolving across the industry.
Can Avis Budget Turn Efficiency Into Growth?
The main question is whether better execution can produce durable revenue growth. Total rental days declined 2% in the second quarter, while revenue per day was nearly flat excluding currency effects. Management expects third-quarter revenue per day to remain roughly flat, with a smaller fleet and higher utilization again shaping results.
Recovering travel demand and projected expansion in the North American rental market could provide support, but current trends do not yet confirm a broad rebound. Uber Technologies, Inc. (UBER - Free Report) remains relevant to the mobility landscape as it expands autonomous-vehicle partnerships, including fleet operations with Hertz. CAR’s Waymo partnership may create another avenue for growth, though the near-term investment case still depends on core rental demand.
CAR’s Style Scores Do Not Erase Near-Term Caution
The bottom line is that operational progress is real, but it has not removed the risks tied to liquidity, leverage, demand and valuation. Waiting for clearer revenue momentum and balance-sheet improvement looks more prudent than buying solely on recent efficiency gains.
CAR currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Its Value Score of A and Growth Score of B point to favorable characteristics in those styles, but Style Scores are designed to complement the Zacks Rank, not override it. A Momentum Score of D and steep downward earnings-estimate revisions reinforce the near-term caution.