Custom Truck One Source came into this Q3 2026 print with a reputation as a high-growth utility and infrastructure equipment platform, trading on a rich 81x P/E and a stock that had already climbed over the past month. The fresh numbers did not scare traders. Shares jumped 16.7% to US$10.51 after the release.
The market cheered one thing above all. Rental economics in the Service segment produced US$111 million of adjusted EBITDA and a 22.4% consolidated margin, which pushed the long-running growth story closer to a cash engine than a concept. The price move now has to live up to that rental performance.
Love the rental-driven EBITDA punch from Custom Truck One Source but wary of paying an 81x P/E for it? Compare that story with our list of 29 high quality undervalued stocks .
Q3 2026 Earnings Summary
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Revenue (Q3 2026):US$495.2 million vs. US$482.1 million in Q3 2025 (+2.7%)
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Net Income (Excl. Extra Items, Q3 2026):US$2.3 million vs. a loss of US$5.8 million in Q3 2025 (returned to profit)
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Basic EPS (Q3 2026):US$0.01 vs. a loss of US$0.03 per share in Q3 2025 (moved back into positive territory)
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Adjusted EBITDA Margin (Q3 2026):22.4% vs. prior year margin in the high teens (fourth straight quarter above 20%)
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Custom Truck One Source Inches Toward The Cash Flow Test
The bullish script on Custom Truck One Source hinges on a cleaner cash story rather than just louder grid headlines.
"The main thing that has to go right is that Custom Truck One Source successfully shifts from heavy rental fleet investment toward consistent free cash flow generation while managing higher chassis costs tied to new emissions rules."
Q3 hits part of that ambition. SER rental strength pushed adjusted EBITDA margin to 22.4% and helped net leverage fall to 3.7x. At the same time, management lifted 2026 rental fleet investment to US$210m to US$230m, which signals that growth-first capital spending is still delaying the full free cash flow pivot.
The price and this Narrative do not agree. → Uncover what this Narrative says Custom Truck One Source is actually worth .
Custom Truck One Source: Cash Concerns Shift, Not Settled
Bearish investors argue that Custom Truck One Source still has to prove its cash model, not just its income statement.
"While management is focused on growing a relatively young rental fleet and has adjusted net rental CapEx to support mid single digit net OEC growth, the company still has to prove that this capital heavy approach can consistently translate into positive free cash flow after funding fleet needs."
Q3 results partly challenge that worry. Rental driven EBITDA, higher guidance and a 3.7x net leverage ratio show better earnings power and some balance sheet progress. The concern is not gone, though, because net rental fleet investment has been lifted to US$210m to US$230m, which pushes the full free cash flow proof point further out.
Hunt For Mispriced Cash Engines
Custom Truck One Source just showed how a strong rental story can quickly reshape the market's view of a capital heavy platform. The real opportunity is finding stocks that could be undervalued before the market corrects them.
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Company 1 - 26% below our estimate - sells injectable weight-loss and diabetes drugs that are pulling treatment budgets away from older therapies.
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Company 2 - 19% below our estimate - scales a teahouse network using overseas franchise growth and membership data to lift store level transaction volumes.
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Company 3 - 23% below our estimate - installs surgical robots and related tools that hospitals adopt to shift joint procedures toward precise hardware driven workflows.
That is three of the list. See all 29 potentially undervalued companies →
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.
Companies discussed in this article include CTOS .
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