Contrasting McGrath RentCorp (NASDAQ:MGRC) and Ryerson (NYSE:RYZ)

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

Dividends

Ryerson pays an annual dividend of $0.75 per share and has a dividend yield of 3.0%. McGrath RentCorp pays an annual dividend of $1.98 per share and has a dividend yield of 1.7%. Ryerson pays out -60.5% of its earnings in the form of a dividend. McGrath RentCorp pays out 31.9% 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 33 consecutive years. Ryerson is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

94.8% of Ryerson shares are owned by institutional investors. Comparatively, 92.0% of McGrath RentCorp shares are owned by institutional investors. 6.6% of Ryerson shares are owned by insiders. Comparatively, 1.4% of McGrath RentCorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for Ryerson and McGrath RentCorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ryerson	2	1	0	0	1.33
McGrath RentCorp	0	2	2	0	2.50

McGrath RentCorp has a consensus target price of $141.50, indicating a potential upside of 21.30%. Given McGrath RentCorp’s stronger consensus rating and higher possible upside, analysts clearly believe McGrath RentCorp is more favorable than Ryerson.

Risk & Volatility

Ryerson has a beta of 1.65, meaning that its share price is 65% more volatile than the S&P 500. Comparatively, McGrath RentCorp has a beta of 0.44, meaning that its share price is 56% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ryerson	-0.56%	-0.62%	-0.21%
McGrath RentCorp	16.38%	12.44%	6.38%

Valuation & Earnings

This table compares Ryerson and McGrath RentCorp”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ryerson	$4.57 billion	0.29	-$56.40 million	($1.24)	-20.34
McGrath RentCorp	$944.23 million	3.02	$156.31 million	$6.21	18.78

McGrath RentCorp has lower revenue, but higher earnings than Ryerson. Ryerson is trading at a lower price-to-earnings ratio than McGrath RentCorp, indicating that it is currently the more affordable of the two stocks.

Summary

McGrath RentCorp beats Ryerson on 11 of the 17 factors compared between the two stocks.

About Ryerson

Ryerson Holding Corporation, together with its subsidiaries, processes and distributes industrial metals in the United States, Canada, Mexico, and China. It offers a line of products in carbon steel, stainless steel, alloy steels, and aluminum, as well as nickel and red metals in various shapes and forms, including coils, sheets, rounds, hexagons, square and flat bars, plates, structural, and tubing. The company also provides various processing services, such as bending, beveling, blanking, blasting, burning, cutting-to-length, drilling, embossing, flattening, forming, grinding, laser cutting, machining, notching, painting, perforating, polishing, punching, rolling, sawing, scribing, shearing, slitting, stamping, tapping, threading, welding, or other techniques to process materials. It serves various industries, including commercial ground transportation, metal fabrication and machine shops, industrial machinery and equipment manufacturing, consumer durable equipment, HVAC manufacturing, construction equipment manufacturing, food processing and agricultural equipment manufacturing, and oil and gas. The company was founded in 1842 and is headquartered in Chicago, Illinois.

About McGrath RentCorp

McGrath RentCorp operates as a business to business rental company in the United States and internationally. It rents and sells relocatable modular buildings, portable storage containers, and electronic test equipment. The company operates through four segments: Mobile Modular, Portable Storage, TRS-RenTelco, and Enviroplex. The Mobile Modular segment rents and sells modular buildings designed for use as classrooms, temporary offices adjacent to existing facilities, sales offices, construction field offices, restroom buildings, health care clinics, child care facilities, office spaces, and various other purposes. The TRS-RenTelco segment rents and sells general purpose electronic test equipment, such as oscilloscopes, amplifiers, analyzers, signal source, and power source test equipment primarily to aerospace, defense, electronics, industrial, research, and semiconductor industries. It also provides communications test equipment, including network and transmission test equipment for various fiber, copper, and wireless networks to the manufacturers of communications equipment and products, electrical and communications installation contractors, field technicians, and service providers. The Portable Storage segment offers steel containers to provide a temporary storage solution. The Enviroplex segment manufactures and sells portable classrooms directly to public school districts and other educational institutions in California. The company was incorporated in 1979 and is based in Livermore, California.