Comparing McGrath RentCorp (MGRC) & Aircastle Limited (NYSE:AYR)

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

Profitability

This table compares McGrath RentCorp and Aircastle Limited’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%
Aircastle Limited 15.75% 7.41% 1.85%

Volatility & Risk

McGrath RentCorp has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500. Comparatively, Aircastle Limited has a beta of 1.81, indicating that its share price is 81% more volatile than the S&P 500.

Dividends

McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 2.7%. Aircastle Limited pays an annual dividend of $1.04 per share and has a dividend yield of 4.8%. McGrath RentCorp pays out 59.4% of its earnings in the form of a dividend. Aircastle Limited pays out 62.7% 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 increased its dividend for 6 consecutive years and Aircastle Limited has increased its dividend for 15 consecutive years. Aircastle Limited is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares McGrath RentCorp and Aircastle Limited’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
Aircastle Limited $820.09 million 2.10 $130.66 million $1.66 13.17

Aircastle Limited has higher revenue and earnings than McGrath RentCorp. Aircastle Limited 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, 62.8% of Aircastle Limited shares are held by institutional investors. 4.6% of McGrath RentCorp shares are held by company insiders. Comparatively, 2.7% of Aircastle Limited shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations for McGrath RentCorp and Aircastle Limited, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McGrath RentCorp 0 0 1 0 3.00
Aircastle Limited 1 7 1 0 2.00

McGrath RentCorp presently has a consensus price target of $40.00, suggesting a potential upside of 3.52%. Aircastle Limited has a consensus price target of $24.33, suggesting a potential upside of 11.26%. Given Aircastle Limited’s higher probable upside, analysts plainly believe Aircastle Limited is more favorable than McGrath RentCorp.

Summary

McGrath RentCorp beats Aircastle Limited on 9 of the 16 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.

Aircastle Limited Company Profile

Aircastle Limited is a holding company. The Company, through its subsidiaries, acquires, leases and sells commercial jet aircrafts to airlines. The Company is engaged in financing and managing commercial flight equipment. The Company manages its aircrafts in the United States, Ireland and Singapore. As of December 31, 2016, the Company owned and managed on behalf of its joint ventures 206 aircrafts leased to 71 lessees located in 36 countries. The Company originates acquisitions and sales through relationships with airlines, other aircraft lessors, financial institutions and brokers, as well as other sources. As of February 7, 2017, the Company had lease commitments or letters of intent to lease or sell 16 aircrafts. The Company’s aircraft portfolio includes passenger wide-body, passenger narrow-body and freighter aircrafts. The Company’s portfolio spans across various regions, such as the Middle East and Africa, South America, North America, Asia and Pacific, and Europe.

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