CAR

We rate AVIS BUDGET GROUP, INC. (CAR) as a Reduce with a composite score of 47.1/100 at a current price of $92.78. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (80th percentile) and momentum (55th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (35th percentile) and quality (42th percentile) tempers our overall conviction. We assign a No Moat rating (28/100), High uncertainty, and Poor capital allocation.

Key items to watch: the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

AVIS BUDGET GROUP, INC. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.1/100 places it at rank #2481 in our full 7,333-stock universe. At $5.7B in market capitalization, AVIS BUDGET GROUP, INC. is a mid-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 15%, though momentum at the 55th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 100% (+40.4pp vs sector) narrow to operating margins of -1% (-4.6pp vs sector) and net margins of -0.9%, yielding a gross-to-net conversion rate of -1%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $92.78, AVIS BUDGET GROUP, INC. appears undervalued relative to its fundamentals. Our value factor score of 80/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 34.3x (a 44% premium to the sector median of 23.7x), EV/EBITDA of 24.3x (at a premium), P/S of 0.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to AVIS BUDGET GROUP, INC.. Key risk factors include elevated market sensitivity (beta of 1.39), current negative profitability (net margin -0.9%), below-average price stability (35th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.39); current negative profitability (net margin -0.9%); below-average price stability (35th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 35th percentile and quality factor at the 42th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate AVIS BUDGET GROUP, INC.'s capital allocation as Poor. Key concerns include low returns on equity (-106.8%), negative profitability, weak asset returns (ROA 0.3%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — AVIS BUDGET GROUP, INC. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, AVIS BUDGET GROUP, INC. receives a Reduce rating with a composite score of 47.1/100 (rank #2481 of 7,333). Our quantitative framework assigns a No Moat (28/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 52/100.

Our analysis does not support a constructive view on AVIS BUDGET GROUP, INC. at this time. The combination of limited competitive advantages, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.