Contrasting McGrath RentCorp (NASDAQ:MGRC) and GATX (NYSE:GATX)

GATX (NYSE:GATX) and McGrath RentCorp (NASDAQ:MGRC) are both mid-cap industrials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, risk and analyst recommendations.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for GATX and McGrath RentCorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
GATX	0	0	4	0	3.00
McGrath RentCorp	0	2	1	0	2.33

GATX currently has a consensus price target of $219.00, suggesting a potential upside of 20.48%. McGrath RentCorp has a consensus price target of $140.00, suggesting a potential upside of 22.11%. Given McGrath RentCorp’s higher possible upside, analysts plainly believe McGrath RentCorp is more favorable than GATX.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
GATX	$1.74 billion	3.69	$333.30 million	$10.10	18.00
McGrath RentCorp	$944.23 million	2.97	$156.31 million	$6.21	18.46

GATX has higher revenue and earnings than McGrath RentCorp. GATX 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 GATX and McGrath RentCorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
GATX	17.94%	10.43%	2.12%
McGrath RentCorp	16.38%	12.44%	6.38%

Risk and Volatility

GATX has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500. Comparatively, McGrath RentCorp has a beta of 0.45, meaning that its share price is 55% less volatile than the S&P 500.

Institutional and Insider Ownership

93.1% of GATX shares are held by institutional investors. Comparatively, 92.0% of McGrath RentCorp shares are held by institutional investors. 1.9% of GATX shares are held by insiders. Comparatively, 1.4% of McGrath RentCorp shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Dividends

GATX pays an annual dividend of $2.64 per share and has a dividend yield of 1.5%. McGrath RentCorp pays an annual dividend of $1.98 per share and has a dividend yield of 1.7%. GATX pays out 26.1% 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. GATX has raised its dividend for 15 consecutive years and McGrath RentCorp has raised its dividend for 33 consecutive years. McGrath RentCorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

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

About GATX

GATX Corporation, together its subsidiaries, operates as railcar leasing company in the United States, Canada, Mexico, Europe, and India. It operates through three segments: Rail North America, Rail International, and Portfolio Management. The company leases tank and freight railcars, and locomotives for petroleum, chemical, food/agriculture, and transportation industries. It also offers maintenance services, including the interior cleaning of railcars, routine maintenance and repair of car body and safety appliances, regulatory compliance works, wheelset replacements, interior blast and lining, exterior blast and painting, and car stenciling services. In addition, the company manufactures commercial aircraft jet engines and leases aircraft spare engines; and owns and manages tank containers that are leased to chemical, industrial gas, energy, food, cryogenic and pharmaceutical industries, and tank container operators, as well as provides tank container sourcing, remarketing, and inspection and maintenance services. As of December 31, 2023, it owned and operated a fleet of approximately 148,500 railcars; 493 four-axle and 30 six-axle locomotives; 399 aircraft spare engines; and 23,931 tank containers. GATX Corporation was founded in 1898 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.