Mcgrath Rentcorp (NASDAQ: MGRC)

Sector: Industrials Industry: Rental & Leasing Services CIK: 0000752714
Market Cap 2.79 Bn
P/B 7.05
P/E 70.47
P/S 6.57
ROIC (Qtr) 9.65
Div Yield % 1.29
Rev 1y % (Qtr) -3.87
Total Debt (Qtr) 551.80 Mn
Debt/Equity (Qtr) 0.46
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About

McGrath RentCorp, a California-based company, operates in the diversified business-to-business rental industry under the symbol MGRC. The company's main business activities include providing rental solutions to customers in various industries such as education, healthcare, construction, and manufacturing. McGrath RentCorp generates revenue through the rental of its products, which include relocatable modular buildings, portable storage containers, and electronic test equipment. The company's primary products in the relocatable modular buildings...

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Investment thesis

Bull case

  • Operating cash flow of 211.54M provides strong 19.88x coverage of stock compensation 10.64M, indicating sustainable incentive practices.
  • Strong tangible asset base of 1.97B provides 3.57x coverage of total debt 551.80M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 135.50M exceeds capital expenditure of 76.04M by 1.78x, indicating strong organic growth funding capability.
  • Tangible assets of 1.97B provide exceptional 15.06x coverage of deferred revenue 130.77M, showing strong service capability backing.
  • Operating cash flow of 211.54M provides strong 15.76x coverage of inventory 13.42M, indicating efficient inventory management.

Bear case

  • Operating cash flow of 211.54M barely covers its investment activities of (97.99M), with a coverage ratio of -2.16, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 211.54M provides thin coverage of dividend payments of (47.62M) with a -4.44 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 7.26M provide limited coverage of acquisition spending of (21.95M), which is -0.33x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 241.35M relative to inventory of 13.42M (17.98 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 230.32M show weak coverage of depreciation charges of 106.35M, with a 2.17 ratio indicating high capital intensity and potential reinvestment needs.

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Rental & Leasing Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 URI United Rentals, Inc. 55.62 Bn 22.30 3.45 15.35 Bn
2 FTAI FTAI Aviation Ltd. 27.80 Bn -179.72 106.00 3.45 Bn
3 AER AerCap Holdings N.V. 26.27 Bn 7.00 3.08 43.57 Bn
4 UHAL U-Haul Holding Co /NV/ 13.75 Bn 106.91 2.29 8.06 Bn
5 GATX Gatx Corp 9.00 Bn 53.16 6.81 9.03 Bn
6 R Ryder System Inc 8.88 Bn 17.80 0.70 7.65 Bn
7 AL Air Lease Corp 7.23 Bn 6.92 2.40 19.73 Bn
8 HRI Herc Holdings Inc 5.00 Bn 5,004.00 1.14 9.68 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.33 1.32
EV to Cash from Ops. EV/CFO 24.57 77.20
EV to Debt EV to Debt 5.65 3.45
EV to EBIT EV/EBIT 38.63 -105.66
EV to EBITDA EV/EBITDA 19.43 20.85
EV to Free Cash Flow [EV/FCF] EV/FCF 45.77 -1.38
EV to Market Cap EV to Market Cap 1.12 3.10
EV to Revenue EV/Rev 7.34 9.87
Price to Book Value [P/B] P/B 7.05 7.72
Price to Earnings [P/E] P/E 70.47 277.95
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.05 3.00
Dividend Payout Ratio % Div Payout % (Qtr) 32.50 500.03
Dividend per Basic Share Div per Share (Qtr) 1.93 1.19
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 35.05 6.22
Interest Coverage Int. cover (Qtr) 6.98 -60.94
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 62.14 17.05
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 78.90 54.66
Dividend Growth (1y) % Div 1y % (Qtr) 2.12 0.10
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -35.21 38.63
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -1.83 5.40
EBIT Growth (1y) % EBIT 1y % (Qtr) -35.28 2.84
EBT Growth (1y) % EBT 1y % (Qtr) -35.38 42.60
EPS Growth (1y) % EPS 1y % (Qtr) -35.48 243.85
FCF Growth (1y) % FCF 1y % (Qtr) 19.71 5.41
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 2.41 31.59
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.40 0.54
Cash Payout Ratio Cash Payout (Qtr) 0.17 0.03
Cash Ratio Cash Ratio 0.00 0.21
Current Ratio Current Ratio 0.00 1.01
Debt to Equity Ratio Debt/Equity (Qtr) 0.46 20.57
Interest Cover Ratio Int Coverage (Qtr) 6.98 -60.94
Times Interest Earned Times Interest Earned (Qtr) 6.98 -60.94
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 36.20 35.32
EBIT Margin % EBIT Margin % (Qtr) 24.73 12.98
EBT Margin % EBT Margin % (Qtr) 21.19 3.50
Gross Margin % Gross Margin % (Qtr) 47.40 42.91
Net Profit Margin % Net Margin % (Qtr) 15.60 1.24