McGrath RentCorp (NASDAQ: MGRC) and Air Lease Corp (NYSE:AL) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, risk, dividends, valuation, analyst recommendations, profitability and earnings.
Dividends
McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 2.7%. Air Lease Corp 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 Corp 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 15 consecutive years and Air Lease Corp has raised its dividend for 3 consecutive years. McGrath RentCorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Institutional & Insider Ownership
82.6% of McGrath RentCorp shares are held by institutional investors. Comparatively, 95.1% of Air Lease Corp shares are held by institutional investors. 4.6% of McGrath RentCorp shares are held by insiders. Comparatively, 9.8% of Air Lease Corp shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Profitability
This table compares McGrath RentCorp and Air Lease Corp’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 Corp | 26.49% | 11.54% | 2.76% |
Analyst Recommendations
This is a summary of recent recommendations and price targets for McGrath RentCorp and Air Lease Corp, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| McGrath RentCorp | 0 | 0 | 1 | 0 | 3.00 |
| Air Lease Corp | 0 | 2 | 6 | 0 | 2.75 |
McGrath RentCorp currently has a consensus target price of $40.00, suggesting a potential upside of 3.57%. Air Lease Corp has a consensus target price of $45.43, suggesting a potential upside of 15.36%. Given Air Lease Corp’s higher possible upside, analysts clearly believe Air Lease Corp is more favorable than McGrath RentCorp.
Earnings and Valuation
This table compares McGrath RentCorp and Air Lease Corp’s revenue, earnings per share 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 | 22.07 |
| Air Lease Corp | $1.47 billion | 2.76 | $356.08 million | $3.45 | 11.41 |
Air Lease Corp has higher revenue and earnings than McGrath RentCorp. Air Lease Corp is trading at a lower price-to-earnings ratio than McGrath RentCorp, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
McGrath RentCorp has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, Air Lease Corp has a beta of 1.78, meaning that its stock price is 78% more volatile than the S&P 500.
Summary
Air Lease Corp beats McGrath RentCorp on 12 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 Air Lease Corp
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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