Amerco (NASDAQ:UHAL) is a $10B moving and storage operations and insurance provider. The company is founded in 1945 and went public in the mid-1990s. The stock trades under the symbol UHAL and is currently hovering at all-time highs above $500 a share.
The recovery from March 2020 was especially rewarding with Amerco stock rising 125% in less than a year. But should investors chase the rally? That is the question we hope the Elliott Wave chart below can help us answer.
At first glance, the answer is no. The weekly chart reveals a clear five-wave impulse pattern starting from the low at $1.36 in 2002. In recent weeks we’ve seen this same pattern in numerous other stocks. It cannot be just a coincidence.
Amerco’s impulsive structure is labeled (1)-(2)-(3)-(4)-(5), where the five sub-waves of wave (3) are also visible. According to the theory, a three-wave correction follows every impulse and typically erases the entire fifth wave. Attempts to pick the top are never a good idea. Suffice to say that once wave (5) is over, UHAL can tumble to $250 or lower again.
Fundamentals Cannot Save Amerco
Besides, the Elliott Wave analysis above is not the only reason to be bearish. Amerco‘s income statement suggests this is a profitable company. However, capital expenditure spending, which for Amerco is quite significant, is not included in the P&L statement. A quick look at the cash flow statement reveals that after adding non-cash charges and subtracting CapEx, there is no money left for shareholders whatsoever.
Free cash flow at Amerco has been negative for years. The company is forced to borrow to finance its operations and long-term debt has been rising. In other words, this is not the money-printing business it appears to be. Coupled with the high probability of a 50% Elliott Wave correction, we don’t think UHAL stock is worth the risk right now.