Critical Survey: Fastenal (NASDAQ:FAST) versus United Rentals (NYSE:URI)

United Rentals (NYSE:URI) and Fastenal (NASDAQ:FAST) are both large-cap industrials companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, earnings, dividends, valuation, risk and institutional ownership.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
United Rentals	15.67%	31.72%	9.47%
Fastenal	15.45%	34.03%	26.16%

Analyst Recommendations

This is a breakdown of recent ratings and target prices for United Rentals and Fastenal, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Rentals	1	0	16	1	2.94
Fastenal	2	6	5	0	2.23

United Rentals presently has a consensus target price of $1,246.19, suggesting a potential upside of 8.42%. Fastenal has a consensus target price of $48.83, suggesting a potential downside of 1.76%. Given United Rentals’ stronger consensus rating and higher probable upside, research analysts clearly believe United Rentals is more favorable than Fastenal.

Volatility and Risk

United Rentals has a beta of 1.8, suggesting that its stock price is 80% more volatile than the S&P 500. Comparatively, Fastenal has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500.

Dividends

United Rentals pays an annual dividend of $7.88 per share and has a dividend yield of 0.7%. Fastenal pays an annual dividend of $1.04 per share and has a dividend yield of 2.1%. United Rentals pays out 18.9% of its earnings in the form of a dividend. Fastenal pays out 88.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. United Rentals has increased its dividend for 3 consecutive years and Fastenal has increased its dividend for 26 consecutive years. Fastenal is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

96.3% of United Rentals shares are owned by institutional investors. Comparatively, 81.4% of Fastenal shares are owned by institutional investors. 0.5% of United Rentals shares are owned by company insiders. Comparatively, 0.3% of Fastenal shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares United Rentals and Fastenal”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Rentals	$16.10 billion	4.44	$2.49 billion	$41.64	27.60
Fastenal	$8.20 billion	6.96	$1.26 billion	$1.18	42.13

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

Summary

United Rentals beats Fastenal on 12 of the 18 factors compared between the two stocks.

About United Rentals

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It operates in two segments, General Rentals and Specialty. The General Rentals segment rents general construction and industrial equipment includes backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment; aerial work platforms, such as boom and scissor lifts; and general tools and light equipment comprising pressure washers, water pumps, and power tools for construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The specialty segment rents specialty construction products, including trench safety equipment consists of trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers, and line testing equipment for underground work; power and heating, ventilating, and air conditioning equipment, such as portable diesel generators, electrical distribution equipment, and temperature control equipment; fluid solutions equipment for fluid containment, transfer, and treatment; and mobile storage equipment and modular office space. This segment serves construction companies involved in infrastructure projects, and municipalities and industrial companies. It also sells aerial lifts, reach forklifts, telehandlers, compressors, and generators; construction consumables, tools, small equipment, and safety supplies; and parts for equipment that is owned by its customers, as well as provides repair and maintenance services. The company sells used equipment through its sales force, brokers, website, at auctions, and directly to manufacturers. The company operates in the United States, Canada, Europe, Australia, and New Zealand. United Rentals, Inc. was incorporated in 1997 and is headquartered in Stamford, Connecticut.

About Fastenal

Fastenal Company, together with its subsidiaries, engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, Mexico, North America, and internationally. It offers fasteners, and related industrial and construction supplies under the Fastenal name. The company’s fastener products include threaded fasteners, bolts, nuts, screws, studs, and related washers that are used in manufactured products and construction projects, as well as in the maintenance and repair of machines. It also offers miscellaneous supplies and hardware, including pins, machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, rivets, and related accessories. The company serves the manufacturing market comprising original equipment manufacturers; maintenance, repair, and operations customers; non-residential construction market; farmers, truckers, railroads, mining companies, schools, and retail trades; and oil exploration, production, and refinement companies, as well as federal, state, and local governmental entities. Fastenal Company was founded in 1967 and is headquartered in Winona, Minnesota.