Financial Analysis: Air Lease Corporation (AL) and McGrath RentCorp (MGRC)
Air Lease Corporation (NYSE: AL) and McGrath RentCorp (NASDAQ:MGRC) are both transportation companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, profitabiliy, risk and earnings.
This is a summary of recent ratings and target prices for Air Lease Corporation and McGrath RentCorp, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Air Lease Corporation||0||1||6||0||2.86|
Air Lease Corporation currently has a consensus price target of $45.67, indicating a potential upside of 6.85%. McGrath RentCorp has a consensus price target of $40.00, indicating a potential upside of 0.48%. Given Air Lease Corporation’s higher possible upside, analysts plainly believe Air Lease Corporation is more favorable than McGrath RentCorp.
Air Lease Corporation pays an annual dividend of $0.30 per share and has a dividend yield of 0.7%. McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 2.6%. Air Lease Corporation pays out 8.7% of its earnings in the form of a dividend. McGrath RentCorp pays out 59.4% 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. Air Lease Corporation has raised its dividend for 15 consecutive years and McGrath RentCorp has raised its dividend for 3 consecutive years.
Institutional and Insider Ownership
91.8% of Air Lease Corporation shares are held by institutional investors. Comparatively, 82.6% of McGrath RentCorp shares are held by institutional investors. 9.8% of Air Lease Corporation shares are held by insiders. Comparatively, 4.6% of McGrath RentCorp shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
This table compares Air Lease Corporation and McGrath RentCorp’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Air Lease Corporation||25.64%||10.99%||2.64%|
Volatility and Risk
Air Lease Corporation has a beta of 1.78, meaning that its share price is 78% more volatile than the S&P 500. Comparatively, McGrath RentCorp has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500.
Valuation and Earnings
This table compares Air Lease Corporation and McGrath RentCorp’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Air Lease Corporation||$1.44 billion||3.06||$355.92 million||$3.45||12.39|
|McGrath RentCorp||$431.70 million||2.21||$127.68 million||$1.75||22.75|
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.
Air Lease Corporation beats McGrath RentCorp on 13 of the 17 factors compared between the two stocks.
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.
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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