Sunbelt Rentals $SUNB is an interesting case study because the Adjusted EBITDA margin contraction in the face of accelerating growth actually seems "good" for the business
- Adjusted EBITDA margins are contracting due to mix shift in the business toward value added and ancillary services (away from pure rentals)
- These value added services carry lower Adjusted EBITDA margins BUT carry significantly lower capital intensity (so cash conversion goes up and so do returns)
If management plans to grow these value added services faster than rentals, I suspect that Adjusted EBITDA margin might not be the best metric to communicate to the street
(P.s. I am a tourist here, barely just started reading about the company)