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McGrath RentCorp (MGRC)

Undervalued
IndustrialsRental & Leasing ServicesUnited States

Fundamental

75

Price

$114.35

Market Cap

$2.79B

Part 1 · What the company is worth

Overview

McGrath RentCorp is a California-based business-to-business rental company that owns fleets of physical assets and rents them out, mostly on short and medium-term contracts. It rents relocatable modular buildings used as classrooms, temporary offices and site facilities (Mobile Modular), steel storage and office containers (Portable Storage), and electronic test and measurement instruments (TRS-RenTelco). It also owns Enviroplex, a manufacturer that builds portable classrooms to California State Architect specifications and sells them directly to California public school districts. The company had total revenues of $944.2 million in fiscal 2025, and at year-end owned 41,722 modular units, 42,262 containers and a test-equipment fleet with an original cost of $337.1 million.

How it makes money

Revenue comes in four streams: rental income on equipment the company owns, rental-related services (delivery, installation, dismantling, site work), sales of new and used equipment, and other income. In fiscal 2025 the biggest single line was modular rental and rental-related services, while Enviroplex is a pure manufacturing-and-sale business with no rental. The economics of the rental side are those of an asset owner: the company buys a unit once, rents it repeatedly over many years, and then sells it second-hand, so returns depend on utilisation, rental rates and the residual value realised on disposal. Rental terms for modular buildings are typically 12 to 24 months.

Revenue by segment

Mobile Modular68.3%

Rents and sells relocatable modular buildings — classrooms, temporary offices, construction site facilities — to public school districts, state and local government, and commercial customers, together with the delivery, installation and dismantling work around them.

TRS-RenTelco15.8%

Rents and sells general-purpose and communications electronic test and measurement instruments from distribution centres in the Dallas-Fort Worth area and Montreal, serving aerospace and defence, communications, semiconductor and manufacturing customers.

Portable Storage9.8%

Rents steel shipping containers for secure temporary storage, plus ground-level office containers, delivered to the customer's site. Customers are mainly construction firms, retailers and industrial and commercial businesses.

Enviroplex6.1%

Manufactures portable classrooms built to California State Architect requirements and sells them directly to California public school districts and other educational institutions. This segment sells buildings outright and has no rental revenue.

Competitive moat

Scale · Narrow

The company describes itself as the leading modular building supplier in California and Florida with a significant presence in Texas, one of the largest portable storage participants nationally, and one of the largest electronic test equipment rental companies in North America. The advantage it claims rests on its network of regional sales and inventory centres, which lets it repair, modify and redeploy units at lower cost than a smaller operator, on more than forty-five years of manufacturer relationships and application knowledge, and on a standardised, well-maintained fleet that holds residual value. These are real but local advantages: the filing also states that competitors may have greater financial resources and a stronger presence in particular markets, and that test equipment rental faces intense competition. Nothing stops a well-funded rival from opening a yard in the same city.

What drives demand

Moderately cyclical

Demand is mixed rather than uniformly cyclical. Roughly a quarter to a third of rental and sales revenue is tied to education, which follows school bond measures, enrolment and modernisation programmes rather than the business cycle, and that part behaves defensively — though it brings its own political and budget timing risk. The rest follows construction activity, industrial and commercial project work, and, at TRS-RenTelco, customers' research and development and network build spending, all of which soften in a downturn. Renting is also counter-cyclical in one respect: when budgets tighten, some customers rent rather than buy. Seasonality is pronounced: modular classroom shipments peak in the second and third quarters ahead of the school year, portable storage tracks retail demand into the fourth quarter and construction weather, and test equipment activity falls off in December and in the January-February weather months.

Key risks

  • Operating results may fluctuate and miss expectations — The company lists general economic conditions in the geographies and industries it serves, legislative and budget policy, movements in interest rates, customer budgetary constraints, seasonality of its end markets, equipment utilisation levels and supply chain disruption as factors that can make results vary from quarter to quarter and fall short of past performance.
  • Dependence on public school facility funding — Demand for classrooms depends on school facility funding, which comes from statewide and local bond measures, operating budgets, developer fees, various taxes and lottery funds. The filing notes there is no certainty on the timing of bond sales and that projects can take years to translate into demand. Education-related rental and sales revenues represented roughly a quarter to a third of consolidated rental and sales revenues over the three years shown.
  • Residual value of rental equipment — The company's returns assume that units can be sold at or above their depreciated book value at the end of their rental life. If market values for used modular buildings, containers or test instruments fall below that carrying value, the company would take losses on disposal.
  • Goodwill and intangible asset impairment — The balance sheet carries $379.1 million of goodwill and intangible assets, largely from past acquisitions, which are tested for impairment; a deterioration in the outlook for an acquired business would force a write-down.
  • Acquisitions and divestitures — The company has grown partly by acquisition and warns of integration difficulty, diversion of management attention and potential shareholder dilution. It also periodically reassesses the strategic fit of its businesses and may divest them, with risks including loss of customer relationships and write-offs.
  • Reliance on third-party manufacturers — Modular units, containers and test instruments are built by third parties, and the company states it does not have long-term supply contracts with them. Failure to manufacture and deliver to specification, or on time, would affect its ability to serve customers.
  • Key people and CEO transition — The filing flags the risk of failing to manage the transition associated with the appointment of a new Chief Executive Officer, including business disruption and investor uncertainty, and more generally the difficulty of retaining executive management and recruiting key employees.
  • Credit risk on receivables — The company reports historically writing off less than 1% of receivables, but warns that write-offs could increase in an economic downturn as customers' ability to pay deteriorates.
  • IT failure and data security — The company depends on its information systems and discloses that it experienced a cybersecurity attack in 2021 which it judged immaterial, with no material impact on operations; a future failure or breach could be more damaging.

Customer concentration

The filing does not disclose a share of revenue for the largest customer or for a group of top customers, and does not identify any customer as a material concentration. What it does state is that in 2025 Mobile Modular's largest single sale was about 3% of Mobile Modular's sales, 2% of consolidated sales and 1% of consolidated revenues, and that the largest electronic test equipment sale was 3% of that unit's sales and under 1% of consolidated revenues. The customer base is fragmented across thousands of school districts, government bodies and commercial renters; the concentration that matters here is not a single customer but the education end market as a whole.

The case for

Buyers argue that the business is a collection of owned, long-lived assets that are rented out repeatedly, so a unit bought once earns rent for many years and is then sold second-hand at a price that often exceeds its depreciated book value. They point to the 2025 results — total revenue up 4% to $944.2 million, adjusted EBITDA up 3% to $362.5 million, fourth-quarter net income of $49.8 million against $38.9 million a year earlier — and to a thirty-fifth consecutive annual dividend increase as evidence that the model produces steady, distributable cash across cycles. They see the education exposure as an anchor of demand that does not depend on the business cycle, the regional branch networks and long manufacturer relationships as hard for a newcomer to replicate quickly, and rising rental rates on modular units plus recovering test-equipment demand as the source of further growth.

The case against

Sellers fear that this is a capital-hungry business whose earnings depend on assumptions that can break. Growth requires buying fleet, and returns rest on utilisation, rental rates and the residual value of used equipment — the company itself lists the risk that market values fall below depreciated book value. They worry about the concentration in California and Florida school funding, where the filing admits there is no certainty on the timing of bond sales and projects may take years to become demand, so a run of failed bond measures or a state budget squeeze would hit the largest segment. They note $379.1 million of goodwill and intangibles from past acquisitions that would have to be written down if an acquired business disappoints, exposure to interest rates on the debt that funds the fleet, an ongoing chief executive transition the company flags as a risk, and competitors in all three rental lines that may have greater financial resources or a stronger local presence.

Generated on September 19, 2026 with claude-haiku-4-5 — shared with all users

Direct competitors

Who this company fights with for the same customers

No editorial profile for this company yet

No competitor list for this company yet.

Balance Sheet & Liquidity

Revenue

$933M

Trailing 12 months (through 6/30/2026)

Net Income

$153M

Trailing 12 months (through 6/30/2026)

Free Cash Flow

$211M

Total Equity

$1.24B

Total Liabilities

$1.12B

Current Ratio

1.27

Interest Coverage

8.40

Debt/EBITDA

1.68

Earnings Per Share

Revenue & Net Income

Free Cash Flow

Income Breakdown

Historical statement

Margins over time

Debt over time

How heavy the debt is

Growth grid

Growth — Revenue

Fair Value Estimation

General caseUndervalued

Fair Value

$185.90

Current Price

$114.35

Margin of Safety

+38.5%

Fair Value Range

$120.84 - $250.97

Spread across the valuation methods used, not a statistically calibrated confidence interval.

Estimation Methods

Analyst price target:$145.40
Discounted cash flow (DCF):$366.45
Earnings multiple (P/E):$103.86
Graham growth formula:$142.52
Earnings power value (EPV):$95.79
Justified P/B:$106.05
Dividend discount (Gordon):$50.66
P/FFO, funds from operations:$172.52
Mid-cycle earnings:$214.64
Revenue multiple:$108.31
Analyst Consensus:Strong Buy (8B / 1H / 0S)
Last Earnings Surprise:-10.70%

Valuation Metrics

P/E Ratio

18.41

ROE

12.6%

P/B Ratio

2.24

P/FCF

13.33

Gross Margin

48.5%

ROIC

-

Profitability Radar

Value Creation (Economic Moat)

ROIC

-

WACC

7.3%

ROIC − WACC

-

Fundamental Analysis Criteria

Passed (19)

  • EPS shows upward trend
  • EPS CAGR 9.91%
  • Price CAGR 11.20%
  • Gross Margin 48.5%
  • P/FCF 13.33
  • P/B Ratio 2.24
  • Debt/Equity ratio
  • Operating Margin 25.5%
  • Positive Free Cash Flow
  • CapEx intensity
  • Interest Coverage
  • Debt/EBITDA
  • Return on Tangible Assets
  • ROE 12.4%
  • Revenue Growth 5Y 10.5%
  • Analyst Consensus 89% Buy
  • Earnings Quality (OCF/NI) 1.65
  • Share Dilution 0.2%
  • Piotroski F-Score 7/9

Failed (6)

  • Low reliance on intangibles
  • Price below Graham Number
  • DCF valuation (Fairly valued)
  • Earnings Surprise avg -1.7%
  • PEG Ratio 2.08
  • Net Margin Trend 16.4% vs 26.8%

Unavailable (3)

  • ROIC NaN%
  • Dividend Payout NaN%
  • Current Ratio

Piotroski F-Score

7/9

Strong financial health

score
criteria

Earnings Quality

1.65

High quality: earnings backed by cash

Share Dilution

0.2%

Share count is stable

Institutional Holdings

Governance

Executive Team

NameTitleAge
Mr. Philip B. HawkinsPresident, CEO & Director49
Mr. Keith E. PrattExecutive VP, CFO & Assistant Corporate Secretary62
Ms. Gilda Malek J.D.Senior VP, Chief Legal Officer & Corporate Secretary56
Ms. Kristina E. Van Trease-WhitneySenior VP & Chief Strategy Officer55
Mr. David M. Whitney CPASenior VP & Chief Accounting Officer60
Ms. Tara D. WescottSenior VP & Chief Human Resources Officer51
Ms. Chris J. SnyderSenior Vice President of Mobile Modular54
Mr. John P. SkeneskyVP & Division Manager of TRS-RenTelco58
Mr. John P. LieffrigVP & Division Manager of Mobile Modular Portable Storage60

Audit Risk

2

Board Risk

1

Compensation Risk

2

Shareholder Rights Risk

1

Part 2 · The price and when to enter

This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.

Documents

  • Annual Report (10-K)

    A yearly overview of the business, its financial results, and the risks it faces.

    Filed on 2026-02-25

    View document
  • Quarterly Report (10-Q)

    A snapshot of financial performance for the most recent three-month period.

    Filed on 2026-07-29

    View document
  • Current Report (8-K)

    An announcement of a major event, such as a leadership change or big news.

    Filed on 2026-07-29

    View document

via SEC EDGAR

Income History

via SEC EDGAR

Latest News

Recent headlines for MGRC, sourced from Markets Gazette.

No recent news for MGRC.