Head to Head Contrast: McGrath RentCorp (MGRC) and Aaron’s, (AAN)

McGrath RentCorp (NASDAQ: MGRC) and Aaron’s, (NYSE:AAN) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their analyst recommendations, earnings, risk, profitabiliy, institutional ownership, dividends and valuation.

Volatility and Risk

McGrath RentCorp has a beta of 0.98, indicating that its stock price is 2% less volatile than the S&P 500. Comparatively, Aaron’s, has a beta of 0.18, indicating that its stock price is 82% less volatile than the S&P 500.

Dividends

McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 3.0%. Aaron’s, pays an annual dividend of $0.11 per share and has a dividend yield of 0.3%. McGrath RentCorp pays out 63.0% of its earnings in the form of a dividend. Aaron’s, pays out 5.6% 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 10 consecutive years and Aaron’s, has raised its dividend for 15 consecutive years.

Earnings and Valuation

This table compares McGrath RentCorp and Aaron’s, ‘s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
McGrath RentCorp $425.22 million 1.92 $89.51 million $1.65 20.68
Aaron’s, $3.20 billion 0.87 $467.52 million $1.97 20.01

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

Insider and Institutional Ownership

82.5% of McGrath RentCorp shares are held by institutional investors. Comparatively, 99.8% of Aaron’s, shares are held by institutional investors. 5.0% of McGrath RentCorp shares are held by insiders. Comparatively, 1.9% of Aaron’s, shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares McGrath RentCorp and Aaron’s, ‘s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
McGrath RentCorp 9.33% 10.14% 3.48%
Aaron’s, 4.47% 11.81% 6.74%

Analyst Ratings

This is a summary of current recommendations and price targets for McGrath RentCorp and Aaron’s, , as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McGrath RentCorp 0 0 1 0 3.00
Aaron’s, 0 3 3 0 2.50

McGrath RentCorp currently has a consensus target price of $40.00, indicating a potential upside of 17.23%. Aaron’s, has a consensus target price of $37.00, indicating a potential downside of 6.14%. Given McGrath RentCorp’s stronger consensus rating and higher possible upside, equities research analysts plainly believe McGrath RentCorp is more favorable than Aaron’s, .

Summary

Aaron’s, beats McGrath RentCorp on 9 of the 17 factors compared between the two stocks.

About McGrath RentCorp

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.

About Aaron’s,

Aaron’s, Inc. (Aaron’s) is an omnichannel provider of lease-purchase solutions. The Company engages in the sales and lease ownership and specialty retailing of furniture, consumer electronics, home appliances and accessories through its Company-operated and franchised stores in Canada, as well as its e-commerce platform, Aarons.com. Its segments include Sales and Lease Ownership, Progressive Finance Holdings, LLC (Progressive), Dent-A-Med, Inc., doing business as the HELPcard (DAMI), Franchise and Manufacturing. Its stores carry brands, such as Samsung, Frigidaire, Hewlett-Packard, LG, Whirlpool, Simmons, Philips, Ashley and Magnavox. As of December 31, 2016, it had 1,864 Aaron’s stores, consisted of 1,165 Company-operated stores in 28 states, the District of Columbia and Canada, and 699 independently-owned franchised stores in 46 states and Canada. It owns trademarks and trade names used in business, including Progressive, Dent-A-Med, the HELPcard and Woodhaven Furniture Industries.

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