Fastenal (NASDAQ:FAST) & McGrath RentCorp (NASDAQ:MGRC) Financial Analysis

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

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
McGrath RentCorp	0	2	2	0	2.50
Fastenal	2	5	6	0	2.31

McGrath RentCorp currently has a consensus price target of $141.50, suggesting a potential upside of 26.47%. Fastenal has a consensus price target of $49.50, suggesting a potential downside of 0.40%. Given McGrath RentCorp’s stronger consensus rating and higher probable upside, research analysts plainly believe McGrath RentCorp is more favorable than Fastenal.

Volatility & Risk

McGrath RentCorp has a beta of 0.45, meaning that its stock price is 55% less volatile than the S&P 500. Comparatively, Fastenal has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500.

Earnings and Valuation

This table compares McGrath RentCorp and Fastenal”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
McGrath RentCorp	$944.23 million	2.89	$156.31 million	$6.21	18.02
Fastenal	$8.75 billion	6.52	$1.26 billion	$1.18	42.12

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

Institutional & Insider Ownership

92.0% of McGrath RentCorp shares are held by institutional investors. Comparatively, 81.4% of Fastenal shares are held by institutional investors. 1.4% of McGrath RentCorp shares are held by insiders. Comparatively, 0.3% of Fastenal shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

McGrath RentCorp pays an annual dividend of $1.98 per share and has a dividend yield of 1.8%. Fastenal pays an annual dividend of $1.04 per share and has a dividend yield of 2.1%. McGrath RentCorp pays out 31.9% of its earnings in the form of a dividend. Fastenal pays out 88.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. McGrath RentCorp has increased its dividend for 33 consecutive years and Fastenal has increased its dividend for 26 consecutive years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
McGrath RentCorp	16.38%	12.44%	6.38%
Fastenal	15.45%	34.03%	26.16%

Summary

Fastenal beats McGrath RentCorp on 9 of the 17 factors compared between the two stocks.

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.

About Fastenal

Fastenal Company, together with its subsidiaries, engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, Mexico, North America, and internationally. It offers fasteners, and related industrial and construction supplies under the Fastenal name. The company’s fastener products include threaded fasteners, bolts, nuts, screws, studs, and related washers that are used in manufactured products and construction projects, as well as in the maintenance and repair of machines. It also offers miscellaneous supplies and hardware, including pins, machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, rivets, and related accessories. The company serves the manufacturing market comprising original equipment manufacturers; maintenance, repair, and operations customers; non-residential construction market; farmers, truckers, railroads, mining companies, schools, and retail trades; and oil exploration, production, and refinement companies, as well as federal, state, and local governmental entities. Fastenal Company was founded in 1967 and is headquartered in Winona, Minnesota.