Ashtray(LSE:AHT) is one of my favorites FTSE100 shares. Over the long term, the construction equipment rental company has generated an incredible amount of wealth for its investors (increasing by more than 100 times over the past 20 years).

Last week Ashtead received a modern Buy rating from broker City. Here are the details and price target.

High price target

The broker I’m referring to is Berenberg. On (19 September) it announced it had begun monitoring Ashtead shares with a buy position. Its target price for the Footsie share is 7,000 pence, which is around 23% above the current share price.

Berenberg analysts believe that, in the long term, Ashtead—which currently generates a significant portion of its revenue in the U.S.—is well-positioned to grab market share and capitalize on opportunities such as megaprojects and data center construction. Analysts also expect Ashtead’s profit margins to improve in the medium term.

I am hopeful

Now I completely agree with Berenberg’s bullish investment thesis. I’ve been consistently impressed with the potential of this company over the past year. Given that the US is currently in the midst of a massive, multi-year construction boom (infrastructure, data centers, semiconductor plants, on-shoring factories, etc.), I think Ashtead is well-positioned for growth in the coming years.

But there’s another reason I like the stock today. And that’s that interest rates are falling. You see, Ashtead has a decent amount of debt on its balance sheet (which increases risk). And servicing that was pricey, and interest rates were high.

However, with the US Federal Reserve cutting interest rates by 50 basis points last week, things are starting to look up for Ashtead. Lower interest rates should lead to lower interest costs, which in turn should lead to higher yields (and a higher share price).

Reasonable pricing

As for the company’s valuation, I think it’s quite reasonable at the moment. Analysts are expecting earnings per share of $3.96 for this fiscal year (ending April 30, 2025) and $4.55 for the next, the P/E ratio is 19.2, falling to 16.7.

At these multiples, I think the stock has the potential to deliver attractive returns in the coming years. A dividend yield of around 1.5% will assist.

Expect volatility

Now, one downside to this stock is that it is volatile. Whenever there is a fear of economic growth, it tends to fall (since construction is a cyclical industry that is susceptible to economic weakness). So it is probably not the best stock for those looking for stability in their investment portfolios.

However, for those with a long-term investment horizon and elated with a bit of volatility (like me), I think it is worth considering. I think there is a good chance it will beat the FTSE 100 over the next five years, given the situation in the US.