Contrasting Aaron’s (AAN) and United Rentals (URI)

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

Analyst Recommendations

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This is a summary of recent ratings and price targets for Aaron’s and United Rentals, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aaron’s 1 3 7 1 2.67
United Rentals 2 5 8 0 2.40

Aaron’s presently has a consensus price target of $46.50, indicating a potential upside of 2.83%. United Rentals has a consensus price target of $182.00, indicating a potential upside of 11.51%. Given United Rentals’ higher possible upside, analysts clearly believe United Rentals is more favorable than Aaron’s.

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 raised its dividend for 11 consecutive years.

Earnings and Valuation

This table compares Aaron’s and United Rentals’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Aaron’s $3.38 billion 0.94 $292.53 million $2.56 17.66
United Rentals $6.64 billion 2.08 $1.35 billion $10.59 15.41

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

Volatility & Risk

Aaron’s has a beta of 0.05, meaning that its share price is 95% less volatile than the S&P 500. Comparatively, United Rentals has a beta of 2.52, meaning that its share price is 152% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Aaron’s 8.65% 11.64% 7.06%
United Rentals 20.23% 39.19% 7.13%

Insider and Institutional Ownership

90.3% of United Rentals shares are owned by institutional investors. 2.3% of Aaron’s shares are owned by insiders. Comparatively, 1.0% of United Rentals shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

United Rentals beats Aaron’s on 12 of the 18 factors compared between the two stocks.

About Aaron’s

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.

About United Rentals

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.

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