What’s happening with the Ashtead share price?

Jabran Khan looks at the current state of play with the Ashtead share price and decides if he would add the shares to his holdings or not.

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Ashtead (LSE:AHT) shares, like many others, have come under pressure recently due to macroeconomic headwinds and geopolitical issues. So what’s the current state of play with the Ashtead share price and, should I add the shares to my holdings? Let’s take a closer look.

Ashtead share price fall in recent months

As a quick reminder, Ashtead is a multinational construction equipment rental firm with a strong presence in the UK, US, and Canada. It has a customer base of over 800,000 throughout its several key territories which also includes a lot of Europe.

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So what’s been happening with Ashtead shares? Well, as I write, the shares are trading for 3,582p. At this time last year, the shares were trading for 4,801p, which is a 25% decrease over a 12-month period.

The stock market correction in March caused the Ashtead share price to fall close to 35%, from 5,484p to current levels.

The biggest risk

Ashtead’s progress and growth is intrinsically linked to the economic outlook. This is because construction and development goes hand in hand with general economic performance.

Current soaring inflation, coupled with the rising cost of raw materials and the cost of living crisis, has placed economies around the world under pressure. Building and construction could be affected.

If Ashtead’s products weren’t being rented and utilised and instead sat unused in their yards, this would affect performance. In turn, the Ashtead share price and any returns I hope to make could be affected too.

The bull case and my verdict

So now to the positives. Ashtead has an excellent record of consistent historic performance. I do understand that past performance is not a guarantee of the future, however. Looking back, Ashtead increased revenue and gross profit between 2018 and 2020. Figures for 2021 dropped slightly but I believe this was linked to the effects of the pandemic.

Coming up to date, Ashtead reported a Q3 trading update in March for the three months ended 31 January 2022. Revenue increased by 23% compared to the same period last year. The same could be said for operating profit and earnings per share, which increased by 29% and 38% respectively. I’m looking forward to full-year results, which are due after June.

At current levels, the Ashtead share price looks decent value for money on a price-to-earnings ratio of 16, which is very close to the FTSE 100 average of 15. As a bonus, the shares could boost my passive income stream too through dividend payments. Ashtead shares have a current yield of 1.2%. Dividends are never guaranteed and can be cancelled, of course.

I am also a big fan of Ashtead’s business model. In construction, renting is seen as a much cheaper alternative than buying equipment. With its large presence and profile in several key economies, including the US, this should help performance growth and returns to continue.

I’d add Ashtead shares to my holdings currently. It has a good track record of performance historically and recently and would boost my passive income stream. The recent stock market correction has led to the Ashtead share price looking like good value for money right now too.

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Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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