Head-To-Head Review: Rent-A-Center (RCII) versus Air Lease (AL)

Rent-A-Center (NASDAQ: RCII) and Air Lease (NYSE:AL) are both consumer discretionary companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, profitability, risk, analyst recommendations, dividends, valuation and institutional ownership.

Analyst Ratings

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This is a breakdown of current ratings and target prices for Rent-A-Center and Air Lease, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rent-A-Center 1 4 0 0 1.80
Air Lease 1 2 8 0 2.64

Rent-A-Center currently has a consensus price target of $8.25, suggesting a potential downside of 17.42%. Air Lease has a consensus price target of $52.35, suggesting a potential upside of 22.43%. Given Air Lease’s stronger consensus rating and higher possible upside, analysts clearly believe Air Lease is more favorable than Rent-A-Center.

Profitability

This table compares Rent-A-Center and Air Lease’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rent-A-Center 0.25% -11.30% -1.97%
Air Lease 49.87% 10.91% 2.70%

Earnings & Valuation

This table compares Rent-A-Center and Air Lease’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rent-A-Center $2.70 billion 0.20 $6.65 million ($0.54) -18.50
Air Lease $1.45 billion 3.05 $756.15 million $3.65 11.72

Air Lease has lower revenue, but higher earnings than Rent-A-Center. Rent-A-Center is trading at a lower price-to-earnings ratio than Air Lease, indicating that it is currently the more affordable of the two stocks.

Dividends

Rent-A-Center pays an annual dividend of $0.08 per share and has a dividend yield of 0.8%. Air Lease pays an annual dividend of $0.40 per share and has a dividend yield of 0.9%. Rent-A-Center pays out -14.8% of its earnings in the form of a dividend. Air Lease pays out 11.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Air Lease has increased its dividend for 4 consecutive years. Air Lease is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Rent-A-Center has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500. Comparatively, Air Lease has a beta of 1.7, suggesting that its stock price is 70% more volatile than the S&P 500.

Institutional and Insider Ownership

89.8% of Air Lease shares are held by institutional investors. 3.4% of Rent-A-Center shares are held by insiders. Comparatively, 9.3% of Air Lease shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

Air Lease beats Rent-A-Center on 14 of the 16 factors compared between the two stocks.

About Rent-A-Center

Rent-A-Center, Inc., together with its subsidiaries, leases household durable goods to customers on a rent-to-own basis. The company operates through four segments: Core U.S., Acceptance Now, Mexico, and Franchising. It offers durable products, such as consumer electronics; appliances; computers, including tablets; smartphones; and furniture, including accessories under rental purchase agreements. The company also provides merchandise on an installment sales basis; and offers the rent-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks within retailer's locations. It operates retail installment sales stores under the Get It Now and Home Choice names; and rent-to-own and franchised rent-to-own stores under the Rent-A-Centre, ColorTyme, and RimTyme names. As of December 31, 2017, the company owned and operated approximately 2,381 stores in the United States, Canada, and Puerto Rico, including 45 retail installment sales stores; 1,106 Acceptance Now staffed locations in 42 states and Puerto Rico; 125 Acceptance Now Direct locations; and 131 stores in Mexico, as well as franchised 225 rent-to-own stores in 31 states under the Rent-A-Center, ColorTyme, and RimTyme names. Rent-A-Center, Inc. was founded in 1986 and is headquartered in Plano, Texas.

About Air Lease

Air Lease Corporation, an aircraft leasing company, engages in the purchase and leasing of commercial jet transport aircraft to airlines worldwide. The company also sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies, and airlines. In addition, it provides fleet management services to investors and owners of aircraft portfolios. As of December 31, 2017, the company owned a fleet of 244 aircraft, including 188 narrowbody jet aircraft and 56 widebody jet aircraft. Air Lease Corporation was founded in 2010 and is based in Los Angeles, California.

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