Despite a rebound in travel, there simply isn't much to like about Dollar Thrifty Automotive Group
At first glance, first-quarter numbers released this morning look encouraging. Revenue growth was again substantial, leaping 19% to $298 million, with net income climbing from $0.02 to $0.25. Over half of the gain, however, was the result of a change in accounting practices. Excluding this, earnings per share of $0.11 weren't even within shouting distance of the $0.29 estimate. Furthermore, revenues per day declined marginally, and vehicle leasing (which last year accounted for 15% of total revenues) fell 52% to $17.8 million.
Taken alone, last quarter's net profit margin of less than 1% is sufficient cause for concern, but other problems abound. With a debt-to-equity ratio approaching five and more than $2.5 billion in long-term debt, the balance sheet is in disarray. Dollar Thrifty's interest coverage of 1.4% trails both the industry's 4%, and the broader S&P 500's 11.5%.
Capital expenditures as a percentage of sales have been running on the order of 300%, placing positive free cash flow light years away. Valuation isn't attractive either: The stock currently trades at a P/E of 35.
To be fair, a few bright spots could be gleaned from today's earnings. Vehicle rental revenues were up 33.8%. Also, acquisitions expected to close next month will increase Dollar Thrifty's 85,000 vehicle fleet by 7,000. By comparison, Ford Motor's
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Fool contributor Nathan Slaughter can decipher financial statements, but not itemized rental car bills. He owns none of the shares mentioned.