Is Hertz (HTZ) Stock a Buy, Sell, or Hold Amidst Divergent Valuation Signals?

The recent performance of Hertz Global Holdings (HTZ) has sparked a debate among investors, as the company's Q3 2025 earnings report revealed a stark contrast between operational momentum and financial fragility. While Hertz delivered a surprise earnings beat and revenue growth, its valuation metrics and debt profile remain contentious. This analysis examines the conflicting signals to determine whether HTZ is a buy, sell, or hold.

Operational Momentum: A Strategic Turnaround?

Hertz's Q3 2025 results underscored a strategic pivot that has begun to bear fruit. The company reported a record 84% fleet utilization rate-the highest since 2018-and a 50% year-over-year increase in its North American NPS, reflecting improved customer satisfaction. Initiatives such as the Rent2Buy program, which allows customers to test-drive vehicles for three days before purchase, have driven a 70% conversion rate, outperforming traditional dealership benchmarks. These operational gains, coupled with digital sales platforms and fleet modernization, have positioned Hertz to capitalize on the recovering travel sector.

Looking ahead, Hertz aims to achieve a 3-6% EBITDA margin in 2026 and $1 billion in EBITDA by 2027. The company's focus on reducing "dollars per unit" to below $300-a key metric for fleet efficiency-has already yielded progress, with depreciation per unit per month (DPU) at $273 in Q3 2025. Such metrics suggest a disciplined approach to cost control and profitability, which could sustain long-term growth.

Valuation Divergence: Undervalued or Overpriced?

Despite these positives, Hertz's valuation signals remain mixed. On one hand, a discounted cash flow (DCF) analysis suggests the stock is significantly undervalued. According to a DCF model, Hertz's intrinsic value per share is estimated at $63.73 as of Q3 2025, implying a 92.2% discount to its current price. Analysts project free cash flow (FCF) to surge from $250 million in Q3 2025 to $3.0 billion by 2035, driven by improved fleet economics and operational leverage.

On the other hand, traditional metrics paint a different picture. Hertz's price-to-sales (P/S) ratio of 0.28 is well below the industry average of 1.2x for the US Transportation sector, suggesting potential undervaluation. However, its forward P/E ratio of 18.55 appears elevated given the company's negative net margin of -29.58% and an Altman Z-Score of -0.13, which signals a high risk of financial distress. The absence of a price-to-book (P/B) ratio in recent reports further complicates valuation analysis, leaving investors to rely on fragmented data.

Institutional Sentiment: A Mixed Bag

Institutional ownership of HTZ has seen significant shifts in Q3 2025. Pershing Square Capital Management L.P. increased its stake by 18% to 15 million shares, while ING Groep NV added $5 million worth of stock. These inflows reflect confidence in Hertz's strategic direction. Conversely, outflows from firms like Invesco Ltd. and American Century Companies Inc. totaled $34.20 million, highlighting lingering skepticism about the company's debt burden and profitability. The net inflow of $128.81 million over 12 months suggests a cautious optimism among institutional investors.

The Verdict: Buy, Sell, or Hold?

Hertz's Q3 2025 results demonstrate a compelling operational turnaround, with fleet utilization, customer satisfaction, and EBITDA margins showing marked improvement. The DCF analysis further supports the notion of undervaluation, assuming the company can sustain its cost discipline and capitalize on its strategic initiatives. However, the persistent negative net margin, high debt-to-equity ratio, and weak Altman Z-Score cannot be ignored. These factors introduce significant downside risk, particularly if economic conditions deteriorate or fleet demand falters.

For investors with a high risk tolerance, Hertz's current valuation and operational momentum could justify a "Buy" position, especially if the company meets its 2026 EBITDA margin targets. However, the financial instability and mixed institutional sentiment warrant a "Hold" recommendation for more conservative investors. A "Sell" is not warranted at this stage, as the positives-particularly the DCF-driven undervaluation-outweigh the negatives, albeit with caution.