SanDisk Corporation (SNDK), Ryder System, Inc. (R): Tuesday’s Top Upgrades (and Downgrades)

With a dividend yield that’s just a fraction of what its larger banking brethren pay, there’s little to recommend this bank, aside from the valuation on its stock. And today, the P/E ratio tells me there’s little to recommend the stock on that score, either.

Ryder System: time to dismount?
The middle of the summer moving season might seem like a strange time to be downgrading Ryder System, Inc. (NYSE:R), owner of the famed Ryder Truck rental brand. Nonetheless, that’s just what banker BB&T Capital did today — and it’s right to do it.

In contrast to SanDisk Corporation (NASDAQ:SNDK), which generates a bit more free cash flow than it’s allowed to claim as “net income” under GAAP, Ryder actually burns cash on its cashflow statement, even as it claims to be earning income on its income statement.

Cash-burn came to $462 million over the past 12 months. But honestly, even if Ryder System, Inc. (NYSE:R)’s $215 million in claimed GAAP income was all it was cracked up to be, I’d still think the stock expensive: 14.5 times earnings is too much to pay for Ryder’s sub-10% earnings growth rate. And that’s before you even calculate the effect of Ryder System, Inc. (NYSE:R)’s $3.8 billion net-debt load on the stock’s valuation.

Given my druthers, were I asked to recommend a truck rental shop today, I think I’d have to go with U-Haul owner AMERCO (NASDAQ:UHAL) instead. It’s got the free cash flow that Ryder System, Inc. (NYSE:R) lacks, plus a cheaper P/E, a slightly faster growth rate, and a smaller debt load. Honestly, I don’t “love” AMERCO either — but it’s a heck of a better value than Ryder.

The article Tuesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Wells Fargo.

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