Critical Analysis: Aaron’s (NYSE:AAN) vs. United Rentals (URI)

United Rentals (NYSE: URI) and Aaron’s (NYSE:AAN) are both construction companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Valuation and Earnings

This table compares United Rentals and Aaron’s’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
United Rentals $6.64 billion 2.14 $1.35 billion $10.59 16.09
Aaron’s $3.38 billion 0.85 $292.53 million $2.56 16.02

United Rentals has higher revenue and earnings than Aaron’s. Aaron’s is trading at a lower price-to-earnings ratio than United Rentals, indicating that it is currently the more affordable of the two stocks.

Dividends

Aaron’s pays an annual dividend of $0.12 per share and has a dividend yield of 0.3%. United Rentals does not pay a dividend. Aaron’s pays out 4.7% of its earnings in the form of a dividend. Aaron’s has increased its dividend for 11 consecutive years.

Insider & Institutional Ownership

89.6% of United Rentals shares are held by institutional investors. 1.0% of United Rentals shares are held by company insiders. Comparatively, 2.3% of Aaron’s shares are held by company 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.

Volatility & Risk

United Rentals has a beta of 2.56, suggesting that its stock price is 156% more volatile than the S&P 500. Comparatively, Aaron’s has a beta of 0.07, suggesting that its stock price is 93% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for United Rentals and Aaron’s, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
United Rentals 2 5 6 0 2.31
Aaron’s 1 2 8 1 2.75

United Rentals currently has a consensus price target of $186.20, indicating a potential upside of 9.30%. Aaron’s has a consensus price target of $46.50, indicating a potential upside of 13.41%. Given Aaron’s’ stronger consensus rating and higher possible upside, analysts clearly believe Aaron’s is more favorable than United Rentals.

Profitability

This table compares United Rentals and Aaron’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
United Rentals 20.23% 39.19% 7.13%
Aaron’s 8.34% 11.22% 7.02%

Summary

United Rentals beats Aaron’s on 11 of the 18 factors compared between the two stocks.

United Rentals Company Profile

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It operates in two segments, General Rentals; and Trench, Power, and Pump. The General Rentals segment engages in the rental of general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment; aerial work platforms, such as boom lifts and scissor lifts; and general tools and light equipment comprising pressure washers, water pumps, and power tools. This segment serves construction and industrial companies, manufacturers, utilities, municipalities, and homeowners. The Trench, Power, and Pump segment is involved in the rental of specialty construction products, including trench safety equipment, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment for underground work; power and HVAC equipment consisting of portable diesel generators, electrical distribution equipment, and temperature control equipment; and pumps primarily used by energy and petrochemical customers. It serves construction companies involved in infrastructure projects, municipalities, and industrial companies. The company also sells new equipment, such as aerial lifts, reach forklifts, telehandlers, compressors, and generators; contractor supplies, including construction consumables, tools, small equipment, and safety supplies; and parts for equipment that are owned by the company's customers, as well as provides repair and maintenance services. It sells its used equipment through its sales force, brokers, and Website, as well as at auctions and directly to manufacturers. As of January 1, 2018, the company operated 997 rental locations in the United States and Canada. United Rentals, Inc. was founded in 1997 and is headquartered in Stamford, Connecticut.

Aaron’s Company Profile

Aaron's, Inc. operates as an omnichannel provider of lease-purchase solutions. It operates through three segments: Progressive Leasing, Aaron's Business, and DAMI. The company engages in the sale, lease ownership, and specialty retailing of furniture, consumer electronics, home appliances, and accessories. As of February 15, 2018, it operated approximately 1,726 company-operated and franchised stores in 47 states and Canada, as well as its e-commerce platform, Aarons.com. Aaron's, Inc. was founded in 1955 and is headquartered in Atlanta, Georgia.

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