Analyzing McGrath RentCorp (MGRC) and Air Lease Corporation (NYSE:AL)

McGrath RentCorp (NASDAQ: MGRC) and Air Lease Corporation (NYSE:AL) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, dividends and profitability.

Dividends

McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 2.7%. Air Lease Corporation pays an annual dividend of $0.30 per share and has a dividend yield of 0.8%. McGrath RentCorp pays out 59.4% of its earnings in the form of a dividend. Air Lease Corporation pays out 8.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. McGrath RentCorp has raised its dividend for 3 consecutive years and Air Lease Corporation has raised its dividend for 15 consecutive years.

Risk and Volatility

McGrath RentCorp has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500. Comparatively, Air Lease Corporation has a beta of 1.78, indicating that its share price is 78% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for McGrath RentCorp and Air Lease Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McGrath RentCorp 0 0 1 0 3.00
Air Lease Corporation 0 2 6 0 2.75

McGrath RentCorp presently has a consensus price target of $40.00, indicating a potential upside of 3.52%. Air Lease Corporation has a consensus price target of $45.43, indicating a potential upside of 15.54%. Given Air Lease Corporation’s higher possible upside, analysts clearly believe Air Lease Corporation is more favorable than McGrath RentCorp.

Valuation & Earnings

This table compares McGrath RentCorp and Air Lease Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
McGrath RentCorp $431.70 million 2.15 $93.06 million $1.75 22.08
Air Lease Corporation $1.47 billion 2.76 $356.08 million $3.45 11.40

Air Lease Corporation has higher revenue and earnings than McGrath RentCorp. Air Lease Corporation is trading at a lower price-to-earnings ratio than McGrath RentCorp, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

82.6% of McGrath RentCorp shares are held by institutional investors. Comparatively, 95.1% of Air Lease Corporation shares are held by institutional investors. 4.6% of McGrath RentCorp shares are held by insiders. Comparatively, 9.8% of Air Lease Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares McGrath RentCorp and Air Lease Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
McGrath RentCorp 9.74% 10.62% 3.69%
Air Lease Corporation 25.64% 10.99% 2.64%

Summary

Air Lease Corporation beats McGrath RentCorp on 13 of the 17 factors compared between the two stocks.

McGrath RentCorp Company Profile

McGrath RentCorp is a diversified business-to-business rental company. The Company operates through four business segments: modular building and portable storage segment (Mobile Modular); electronic test equipment segment (TRS-RenTelco); a subsidiary providing containment solutions for the storage of hazardous and non-hazardous liquids and solids segment (Adler Tanks), and a subsidiary classroom manufacturing business selling modular buildings used primarily as classrooms in California (Enviroplex). The Mobile Modular business segment includes Mobile Modular Portable Storage division. As of December 31, 2016, the Company’s TRS-RenTelco rented and sold electronic test equipment nationally and internationally from three facilities located in Grapevine, Texas (the Dallas facility), Dollard-des-Ormeaux, Canada (the Montreal facility) and Bangalore, Karnataka, India (the Bangalore facility). Adler Tanks purchases tanks and boxes from various manufacturers located throughout the country.

Air Lease Corporation Company Profile

Air Lease Corporation is an aircraft leasing company. The Company is principally engaged in purchasing new commercial jet transport aircraft directly from aircraft manufacturers, such as The Boeing Company (Boeing) and Airbus S.A.S. (Airbus), and leasing those aircraft to airlines across the world. Along with its leasing activities, the Company sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies and airlines. The Company also provides fleet management services to investors and owners of aircraft portfolios for a management fee. The Company provides aircraft to airline customers in various markets, such as Asia, the Pacific Rim, Latin America, the Middle East, Europe, Africa and North America. As of December 31, 2016, the Company had 237 owned aircraft and 30 aircraft in its managed fleet portfolio.

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