We arrive at our £56 TP using four valuation approaches: PE, EV/EBITA, DCF/EVA and ROCE. In our EV/EBITA approach, we apply a premium to the Business Services sector average to derive our fair value range, as we feel Ashtead should be able to command a premium rating owing to its attractive organic growth prospects, impressive ability to drive EPS CAGR and potential to consolidate its markets.

We see the following risks to our investment view and target price: US macro recovery could stall – the business is operationally and financially levered, and history suggests deeply cyclical earnings. That said, Construction & Infrastructure end-market recovery remains relatively nascent and well below prior peaks. Should an improving market encourage small and medium-sized contractors to return to a more owned-asset model, AHT's revenue growth could suffer. Market recovery could also drive a glut of investment from competitors. However, given the fragmented nature of the industry and differing costs of finance, this appears to us a less immediate risk than during prior cycles. Tighter financial markets could increase the cost of capital – however, AHT is somewhat insulated by having long-term financing in place. Additionally, high finance costs tend to increase customers' propensity to rent. These risks could impede the share price from reaching our target price.