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

Analyst Ratings

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

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

Aircastle Limited currently has a consensus target price of $24.22, indicating a potential upside of 11.88%. McGrath RentCorp has a consensus target price of $40.00, indicating a potential upside of 17.86%. Given McGrath RentCorp’s stronger consensus rating and higher possible upside, analysts clearly believe McGrath RentCorp is more favorable than Aircastle Limited.

Valuation & Earnings

This table compares Aircastle Limited and McGrath RentCorp’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aircastle Limited $788.43 million 2.16 $157.43 million $2.00 10.83
McGrath RentCorp $425.22 million 1.91 $89.51 million $1.65 20.57

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.

Profitability

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

Net Margins Return on Equity Return on Assets
Aircastle Limited 19.81% 8.88% 2.21%
McGrath RentCorp 9.33% 10.14% 3.48%

Dividends

Aircastle Limited pays an annual dividend of $1.04 per share and has a dividend yield of 4.8%. McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 3.1%. Aircastle Limited pays out 52.0% of its earnings in the form of a dividend. McGrath RentCorp pays out 63.0% 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. Aircastle Limited has increased its dividend for 6 consecutive years and McGrath RentCorp has increased its dividend for 15 consecutive years. Aircastle Limited is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

63.4% of Aircastle Limited shares are held by institutional investors. Comparatively, 82.5% of McGrath RentCorp shares are held by institutional investors. 2.7% of Aircastle Limited shares are held by insiders. Comparatively, 4.6% of McGrath RentCorp shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Risk & Volatility

Aircastle Limited has a beta of 1.8, meaning that its share price is 80% more volatile than the S&P 500. Comparatively, McGrath RentCorp has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500.

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.

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.

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