Avis: Driving Higher

08/18/2014 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Technician Leo Fasciocco, editor of Ticker Tape Digest, has chosen this car rental outfit as his latest featured breakout stock.

With annual revenues of $8.3 billion, Avis Budget Group (CAR) provides rental car services in 70 countries.

Through its Avis and Budget brands, the company is the largest general-use vehicle rental company in North America, Australia, New Zealand, and certain other regions.

CAR maintains the leading share of airport car rental business and it operates the second largest consumer truck rental business in the US.

CAR's long-term chart shows the stock coming public in late 2006 and trading around $18. The stock fell back hard during the bear market dropping to 34 cents a share. Ugh! The stock has been driving higher; since 2012, it has made a sensation six-fold move.

Over the past 12 months, the stock has risen a sensational 120% versus a 15% gain for the S&P 500 index (SPX). The shares have broken out from a seven-week flat base. The breakout today looks solid coming with expanding volume. The move carries the stock to a new all-time high, which is bullish.

This year, analysts are forecasting a 36% surge in net to $2.99 a share from $2.20 a year ago. The stock sells with a price-earnings ratio of 20. We see that as attractive to value-growth investors since the earnings growth rate is higher.

Looking out to 2015, the Street projects a 26% jump in profits to $3.76 a share from the anticipated $2.99 this year.

Give the stock a p/e ratio of 20—and based on 2015 net—it has a potential value of $72 just using fundamentals. There is always a chance for an expansion in the p/e ratio.

We rate CAR a very good intermediate-term play provided earnings meet expectations. We are targeting CAR for a trip to $72 off this breakout. The brakes can be applied if the stock falls below $58.50.

Insider activity is bullish. Insiders have been getting stock options around $51 to $59 a share. So, they will need to see the stock move much higher to make good money. That is good for bulls.

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