Inside the FTSE 100, tools rental firm Ashstead (LSE: AHT) has been a rip-roaring success and multiplied its shareholders’ cash many instances.

Again in 1990, the then British operator acquired America’s Sunbelt Leases and it’s by no means appeared again, going from power to power.

The agency’s natural development and acquisition technique has since pushed fast growth within the US and likewise taken operations into Canada.

At this time, round 80% of the corporate’s rental shops are within the US with the remaining within the UK and Canada.

Potential development forward

However after such sturdy progress and triumphant market share features, can there be a lot left within the tank to energy additional returns for shareholders? I consider there’s.

One of many nice issues about rental companies is they’re powered by financial exercise itself. If different industries are busy — whether or not worthwhile or not — they have a tendency to make use of tools offered by corporations like Ashtead.

So proudly owning shares in Ashtead may be an effective way of using the coattails of different enterprises with out turning into embroiled in all of the operational challenges they face.

On high of that, Ashtead has confirmed to be effectively directed and has stored increasing to realize a good greater slice of the financial pie.

I feel the corporate’s journey seems to be removed from over, and in the present day’s (3 September) first-quarter outcomes report gives some clues that development is continuous.

Within the three months to 31 July, currency-adjusted rental income rose by 7% yr on yr. In the meantime, the bolt-on acquisition programme continued to roll out and the agency added 33 rental areas to its property in North America.

The expansion juggernaut is ploughing on. Though the reliance of the enterprise on basic financial exercise is a double-edged sword.

Cyclical sensitivity

There’s no denying the corporate is susceptible to basic financial slowdowns and shocks. If different companies wrestle and their work dries up, they’ll use Ashtead’s rental tools much less.

There’s proof of such cyclicality within the firm’s monetary and buying and selling file, and within the share price chart.

It could be straightforward to mis-time an funding in Ashtead shares and lose cash. I feel that’s maybe the largest threat for shareholders right here.

However, in the present day’s outlook assertion asserts that the enterprise is ready of power. The administrators suppose it has the operational flexibility and monetary capability to capitalise on the structural development alternatives they’ll see for the enterprise.

Outcomes for the total yr will seemingly be consistent with expectations, they usually look ahead to the longer term with “confidence”.

Based mostly on previous efficiency, I discover the board’s optimism to be encouraging. In the meantime, the corporate additionally introduced its new chief monetary officer as Alex Pease, who will begin as CFO designate in October.

It seems to be like one other sturdy appointment to the administration workforce. Pease was beforehand CFO of Westrock till its current merger with Smurfit Kappa.

Ashtead has been an excellent performer. However on steadiness, and regardless of the dangers, I nonetheless see it as effectively price additional research and consideration now. To me, it seems to be like an honest candidate for a diversified portfolio of shares centered on the long run.