What the Hiab dealer agreement could mean for Custom Truck One Source (CTOS)

Hiab’s new dealer agreement with Custom Truck One Source (CTOS) expands sales and service coverage for HIAB loader cranes and MOFFETT truck mounted forklifts across multiple US states, giving CTOS broader access to equipment customers.

The Hiab deal lands at a time when momentum in Custom Truck One Source’s share price has been building, with a 30 day share price return of 18.14% and a year to date gain of 29.14%. The 1 year total shareholder return of 66.08% contrasts with a more muted 3 year total shareholder return of 3.45% and a 5 year total shareholder return of a 9.76% loss, suggesting recent optimism has picked up after a tougher longer term journey.

If this expansion story has you thinking about other equipment and infrastructure names, it could be a good moment to scan our 24 power grid technology and infrastructure stocks for fresh ideas linked to critical power networks.

With the shares at US$7.49, a value score of 3, a small 3.5% discount to the average analyst price target, and an intrinsic value estimate that sits above the market price, is CTOS still misunderstood or already pricing in future growth?

Most Popular Narrative: 15.2% Overvalued

The most followed narrative pegs Custom Truck One Source’s fair value at $6.50, below the last close at $7.49, and leans on detailed long term assumptions.

The ongoing transition toward electric and autonomous vehicles risks making Custom Truck One Source's existing portfolio of diesel-powered and legacy platforms obsolete, requiring heavy new investment to maintain competitiveness and potentially rendering existing fleet assets less valuable, which could result in lower return on assets and margin compression over time.

Escalation of strict environmental regulations and emissions standards exposes the company to rising compliance costs, reduced demand for non-compliant equipment, and disruptive shifts in customer purchasing behavior, threatening both top line revenue and long-term profitability.

Curious how a company with forecast profit growth, positive revenue assumptions, and a relatively low discount rate still lands below today’s share price? The tension between improving margins, earnings targets, and the rich future earnings multiple sits at the heart of this fair value story.

Result: Fair Value of $6.50 (OVERVALUED)

However, if demand in core utility markets stays firm and rental utilization remains high, stronger cash generation and lower leverage could continue to challenge this cautious view.

Another View: Market Pricing Versus Sales-Based Value

If you step away from the fair value estimate of $6.50 and look at how the market prices Custom Truck One Source against its sales, the picture changes. The current P/S ratio of 0.9x sits below the US Trade Distributors industry at 1.3x and also below the fair ratio of 1.1x. That gap suggests the share price is not aggressively priced relative to revenue. This raises the question of whether the market is quietly allowing for some margin or growth risk here, or whether there is room for sentiment to catch up.

Next Steps

If this mix of optimism and caution feels familiar, it is a good time to look through the numbers yourself and move quickly while sentiment is still forming; you can also review the 3 key rewards to see what investors are currently optimistic about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.