Value
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.9 |
| P/S | 8.2 |
| EV/EBITDA | 4.0 |
| Fwd P/E | 7.4 |
| PEG | 6.3 |
| Analyst target | 6.0 |
- ▸Forward P/E: 16.8x
- ▸PEG: 1.19
MGRC · Why this verdict
Why McGrath RentCorp (MGRC) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.0/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Operating margins of 16% are recognized as best-in-class within the peer group, supported by a Piotroski F-score of 8 out of 9, reflecting a high-quality, capital-efficient operation. Peer rank | Operating margins remain at or above 14% for 4 consecutive quarters, sustaining the peer-leading quality profile. | →Stable |
| CounterThree medium-severity concentration risks are identified in the 10-K risk factor disclosures, and concentrated revenue streams can compress margins quickly if key relationships deteriorate. | ||
The stock is exhibiting a breakout pattern with a golden cross, price above all major moving averages, bullish MACD, and rising on-balance volume, suggesting accumulation ahead of a potential sustained price move. Chart pattern detection | Price advances above $126.50 over the next two quarters without a round-trip back below current levels. | →Stable |
| CounterThe 200-day moving average slope is flat, and a breakout without slope confirmation can be a false signal; the 10.8% headroom to target does not build in much cushion if the setup fails. | ||
The earnings record over the last four quarters shows two beats and two misses in an alternating pattern, with the most recent quarter a miss — an inconsistency that prevents sustained upward earnings revision and dampens analyst confidence in guidance accuracy. Catalyst breakdown | EPS beats estimates by more than 5% in each of the next 2 consecutive quarters, breaking the miss pattern and restoring earnings predictability. | →Stable |
| CounterThe average positive surprise across all four quarters is 7.6%, and prior beats were substantial at 18% and 20%, suggesting the recent misses may reflect conservative re-basing of guidance rather than structural earnings deterioration. | ||
Both revenue and earnings growth are at the low end of the peer universe, limiting the stock's ability to sustain a premium valuation multiple or attract growth-oriented capital. Growth | EPS surprise exceeds 10% for 3 consecutive quarters, signaling that underlying business momentum has materially improved beyond the current soft-growth trajectory. | →Stable |
| CounterThe company already trades at a forward P/E of 16.3 times with analyst-implied upside of 27%, suggesting the market is pricing in an improvement in growth before it materializes in reported numbers. | ||
Operating margins of 16% are recognized as best-in-class within the peer group, supported by a Piotroski F-score of 8 out of 9, reflecting a high-quality, capital-efficient operation.
→StablePeer rank
- Expectation
- Operating margins remain at or above 14% for 4 consecutive quarters, sustaining the peer-leading quality profile.
CounterThree medium-severity concentration risks are identified in the 10-K risk factor disclosures, and concentrated revenue streams can compress margins quickly if key relationships deteriorate.
The stock is exhibiting a breakout pattern with a golden cross, price above all major moving averages, bullish MACD, and rising on-balance volume, suggesting accumulation ahead of a potential sustained price move.
→StableChart pattern detection
- Expectation
- Price advances above $126.50 over the next two quarters without a round-trip back below current levels.
CounterThe 200-day moving average slope is flat, and a breakout without slope confirmation can be a false signal; the 10.8% headroom to target does not build in much cushion if the setup fails.
The earnings record over the last four quarters shows two beats and two misses in an alternating pattern, with the most recent quarter a miss — an inconsistency that prevents sustained upward earnings revision and dampens analyst confidence in guidance accuracy.
→StableCatalyst breakdown
- Expectation
- EPS beats estimates by more than 5% in each of the next 2 consecutive quarters, breaking the miss pattern and restoring earnings predictability.
CounterThe average positive surprise across all four quarters is 7.6%, and prior beats were substantial at 18% and 20%, suggesting the recent misses may reflect conservative re-basing of guidance rather than structural earnings deterioration.
Both revenue and earnings growth are at the low end of the peer universe, limiting the stock's ability to sustain a premium valuation multiple or attract growth-oriented capital.
→StableGrowth
- Expectation
- EPS surprise exceeds 10% for 3 consecutive quarters, signaling that underlying business momentum has materially improved beyond the current soft-growth trajectory.
CounterThe company already trades at a forward P/E of 16.3 times with analyst-implied upside of 27%, suggesting the market is pricing in an improvement in growth before it materializes in reported numbers.
TrendMatrix Research · core thesis
Engine thesis — one sentence
A strong technical breakout pattern and best-in-class operating margins support the bull case, but soft growth and a recent run of alternating earnings misses introduce enough uncertainty to keep the position sized conservatively relative to the 10.8% headroom to target.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.4 |
| ROA | 4.4 |
| Gross margin | 5.6 |
| Op margin | 8.7 |
| Net margin | 8.2 |
| Current ratio | 6.9 |
| FCF quality | 5.0 |
| Moat | 5.8 |
| Piotroski F | 8.9 |
- ▸Strong margins: 16%
- ▸Earnings quality warning: 65% FCF/NI
- ▸Strong Piotroski F-Score: 8/9
Growth
2.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.9 |
| EPS growth | 1.1 |
Momentum
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 8.0 |
| Volume | 1.6 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.0 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 23%
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Modest insider selling — $2,268,981 (0.078% of mkt cap)
Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.3 |
| quality rank | 6.8 |
| growth rank | 1.8 |
- ▸Best-in-class margins
Technical
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.2 |
| support resistance | 4.4 |
| 52w position | 8.6 |
Risk (lower is worse)
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.1 |
| days to cover | 8.2 |
| volatility | 5.8 |
| put call | 0.0 |
| implied vol | 3.3 |
| beta | 10.0 |
| debt equity | 8.2 |
- ▸Elevated put/call: 8.00
- ▸High IV: 60%
- ▸Concentration risks: 3 MED (10-K Item 1A)
Catalyst
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 6.3 |
| dividend safety | 5.2 |
- ▸Earnings concerns: 2B/2M
- ▸Dividend: 166.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:5.2>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:25d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.8<1.5@spot
Warning (1)
- MOMENTUM:5.2<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
0.84
Upside
+7.3%
Downside
8.7%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 59, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $2.9B<$5B
Investment implication
The F-path SELL output reflects an overall score of 5.0 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 6.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.8<1.5@spot) reinforce the read. Current asymmetry R:R is 0.84 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 6.5, Quality at 6.4, and Risk (lower is worse) at 6.4; the weakest are Growth at 2.0, Insider at 3.9, and Peer rank at 4.2. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.84 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Technical Breakout Setup
Trip ifPrice falls below $107 and holds below for 2 consecutive weeks, invalidating the breakout structure.
- P2Best In Class Operating Margins
Trip ifOperating margin falls below 12% for 2 consecutive quarters.
- P3Alternating Earnings Miss Pattern
Trip ifEPS surprise exceeds 5% in each of the next 2 consecutive quarters.
- P4Soft Growth Trajectory
Trip ifEPS surprise exceeds 10% for 3 consecutive quarters.