Contrasting McGrath RentCorp (NASDAQ:MGRC) & Fastenal (NASDAQ:FAST)

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

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Fastenal and McGrath RentCorp, as reported by MarketBeat.

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

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

Dividends

Fastenal pays an annual dividend of $1.04 per share and has a dividend yield of 2.1%. McGrath RentCorp pays an annual dividend of $1.98 per share and has a dividend yield of 1.8%. 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 pays out 31.9% of its earnings in the form of a dividend. Fastenal has increased its dividend for 26 consecutive years and McGrath RentCorp has increased its dividend for 33 consecutive years.

Valuation and Earnings

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

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

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.

Insider & Institutional Ownership

81.4% of Fastenal shares are owned by institutional investors. Comparatively, 92.0% of McGrath RentCorp shares are owned by institutional investors. 0.3% of Fastenal shares are owned by company insiders. Comparatively, 1.4% of McGrath RentCorp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

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

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

Volatility and Risk

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

Summary

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

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.

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.