Investors of Hertz (OTCMKTS:HTZGQ) are faced with a tough question these days. It’s not whether Hertz stock will go up or down, but if there will be any money left over for them after debtors take their cut.

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To really understand this, let’s play a game. Imagine we’re at the back of a line at a soup kitchen named “HTZGQ” with dozens of hungry people ahead of us. But there’s a problem: there’s only one pot of soup. And as we watch the food get served to people in front of us out, we start realizing they might run out before we get any. Should we still wait in line?

Understand me when I say this: Hertz shares can still make you rich. Shares currently trade a little over $1.50, so if you’re willing to take a flyer on the stock, ALL the remaining proverbial soup will belong to you … provided there’s any left. But rather than speculate, let’s look at the cold, hard numbers and see what we can learn along the way.

Hertz Stock: How Much Soup Is in the Pot?

Let’s start with enterprise value, the “soup” that Hertz is worth before debtors take their cut. Firstly, there’s cash — the amount of liquidity Hertz has in the bank. In Q3, the company reported $1.1 billion in liquidity. Secondly, there’s company property: its vehicle fleet, receivables, property and “intangible” assets like its brand name. That comes out to $17.6 billion.

And finally, there’s the company’s future potential profits — the amount that hasn’t been earned but promises to someday end up in your bank account. But here’s where things get hairy. That’s because we won’t know future profits for years. The best we can do is make educated guesses with the information we know. That’s why you see stocks jump on positive earnings and sink on negative ones as the market adjusts its future expectations.

Valuing HTZGQ Stock

Analysts like me take several approaches to the valuation problem. One option is to use comparable companies, like Avis (NYSE:CAR). We know that Avis has a $16.1 billion enterprise value net of its auto leases. The two have similar footprints: Hertz has 12,400 locations while Avis has 11,000. And while it’s not an apples-to-apples comparison (the two companies have vastly different leasing and franchising structures), they share similar D&A (depreciation and amortization) turnover, and they compete in virtually the same industry.

The second option is to use a “discounted cash flow” model, which estimates future profits and adds them all up, giving a higher priority to cash received sooner. Plugging in analyst estimates ($368 million EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] by 2022 on $7.5 billion of revenue) and assuming EBITDA margins rise to 12.7% by 2024 suggests that Hertz is worth only $8.9 billion, or LESS than the value of its cars. That happens if Hertz is buying cars, but rental returns are so low that each vehicle never recoups its purchase price.

But let’s say industry consolidation improves the industry, and Hertz earns 22% EBITDA margins by 2026. In that somewhat improbable case, its enterprise value shoots up to $19.6 billion. (It’s the reason why high-margin businesses are so valuable.)

How Hungry Are People in Line?

Next, let’s look at the debtors — investors who come ahead of equity holders. These people can claim pieces of Hertz long before shareholders even get a taste. So, how much are they owed?

Firstly, there’s vehicle debt, the leases that Hertz uses to buy its vehicle fleet. These debts get packaged into “asset-backed securities,” and their owners have priority over Hertz’s fleet. That amount comes to $8.8 billion.

Next, there’s direct debts — insurance, accounts payable, deferred taxes and operating leases. These are day-to-day amounts, like the airport terminal that owns the land underneath the Hertz airport kiosk. These come to $5.2 billion for fiscal year 2020.

Finally, we have senior debt — term loans, notes and credit facilities that can lay general claim to everything else Hertz owns. In September, that figure stood at $4.4 billion. And the longer these people wait to get repaid, the more interest payments Hertz will eventually owe.

In total, that means Hertz needs to pay out $18.4 billion to people ahead of us first.

What’s HTZGQ Stock Worth?

Shareholders will quickly realize there’s little room for error. Let’s first look at the good news: there could be $19.6 billion of “soup” in the pot. Once Hertz pays back the $18.4 billion to the people ahead in line, that leaves $1.2 billion for you and me. Dividing by 156 million shares outstanding leaves us at $9 per share, or an 800% upside.

But that $19.6 billion valuation assumes Hertz’s EBITDA margins eventually rises to 22%. And that’s going to be a challenge. Even in good quarters before the coronavirus pandemic, the company rarely peaked above 11% EBITDA. Ride-sharing companies like Lyft (NASDAQ:LYFT) could take a lasting bite out of the car rental business.

More realistically, Hertz is probably worth somewhere between $14 billion and $16 billion enterprise value. Senior debtors are already starting to negotiate for their $4.4 billion investment. And it doesn’t help that the company’s CEO and CFO are both non-specialists at bankruptcy liquidations. If that’s the case, there won’t be anything left over for equity holders waiting in the back. To them, Hertz stock would be worth zero.

There have been notable exceptions to Chapter 11 proceedings. Shareholders of bankrupt American Airlines (NASDAQ:AAL) emerged victorious in 2013 after white-knight U.S. Airways swooped in to buy out the company. And Hertz stock could see a foreign suitor like Sixt or Europcar scoop up its airport locations — Avis and Enterprise might take non-airport ones. But investors still need a buyer to pay more than $18.2 billion if they want more than $0 shares. My advice? Buy Avis and Enterprise (stocks or options) if you really believe the lousy car rental industry will become slightly less lousy after the coronavirus pandemic. Otherwise, try to get a better sense of Hertz’s liquidation value before investing.

So, are you still hungry for some soup?

On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.