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

Dividends

McGrath RentCorp pays an annual dividend of $1.04 per share and has a dividend yield of 2.7%. Neff Corporation does not pay a dividend. McGrath RentCorp pays out 59.4% of its earnings in the form of a dividend. McGrath RentCorp has increased its dividend for 15 consecutive years.

Valuation & Earnings

This table compares McGrath RentCorp and Neff Corporation’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 2.14 $93.06 million $1.75 22.04
Neff Corporation $407.74 million 0.54 $104.75 million $1.42 17.50

Neff Corporation has higher revenue, but lower earnings than McGrath RentCorp. Neff 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.

Volatility and Risk

McGrath RentCorp has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500. Comparatively, Neff Corporation has a beta of 3.41, meaning that its share price is 241% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for McGrath RentCorp and Neff Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McGrath RentCorp 0 0 1 0 3.00
Neff Corporation 0 3 2 0 2.40

McGrath RentCorp currently has a consensus price target of $40.00, indicating a potential upside of 3.71%. Neff Corporation has a consensus price target of $20.20, indicating a potential downside of 18.71%. Given McGrath RentCorp’s stronger consensus rating and higher possible upside, research analysts clearly believe McGrath RentCorp is more favorable than Neff Corporation.

Profitability

This table compares McGrath RentCorp and Neff Corporation’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%
Neff Corporation 3.26% -9.21% 1.81%

Institutional and Insider Ownership

82.6% of McGrath RentCorp shares are owned by institutional investors. Comparatively, 88.1% of Neff Corporation shares are owned by institutional investors. 4.6% of McGrath RentCorp shares are owned by company insiders. Comparatively, 9.0% of Neff Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

McGrath RentCorp beats Neff Corporation on 11 of the 17 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.

Neff Corporation Company Profile

Neff Corporation is an equipment rental company. The Company offers an array of equipment rental solutions for its customer base, including infrastructure, non-residential construction, oil and gas, and residential construction customers. Its fleet of equipment includes earthmoving, material handling, aerial and other rental equipment. Its earthmoving equipment category includes excavators, backhoes, loaders, bulldozers, mini-excavators, sweepers and tractors, track loaders and skid steers. Its material handling equipment category includes reach forklifts, industrial forklifts and straight-mast forklifts. Its aerial equipment category includes personnel lifts, electric scissor lifts, dual fuel scissor lifts, articulating boom lifts and straight boom lifts. Its other rental equipment category includes compaction and concrete, trucks and trailers, sweepers, generators, welders, lighting, pumps and other small equipment and tools. As of December 31, 2016, it had operated 69 branches.

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