Karat Packaging (NASDAQ:KRT) and Herc (NYSE:HRI) Critical Comparison
by Jessica Moore · The Cerbat GemHerc (NYSE:HRI – Get Free Report) and Karat Packaging (NASDAQ:KRT – Get Free Report) are both industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, profitability, valuation and earnings.
Insider & Institutional Ownership
93.1% of Herc shares are held by institutional investors. Comparatively, 25.2% of Karat Packaging shares are held by institutional investors. 2.2% of Herc shares are held by insiders. Comparatively, 57.9% of Karat Packaging 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.
Risk & Volatility
Herc has a beta of 1.86, suggesting that its stock price is 86% more volatile than the S&P 500. Comparatively, Karat Packaging has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500.
Dividends
Herc pays an annual dividend of $2.80 per share and has a dividend yield of 2.0%. Karat Packaging pays an annual dividend of $1.88 per share and has a dividend yield of 4.0%. Herc pays out 190.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Karat Packaging pays out 75.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Herc has raised its dividend for 2 consecutive years and Karat Packaging has raised its dividend for 2 consecutive years. Karat Packaging is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a breakdown of recent ratings and price targets for Herc and Karat Packaging, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Herc | 0 | 3 | 6 | 0 | 2.67 |
| Karat Packaging | 1 | 2 | 3 | 0 | 2.33 |
Herc currently has a consensus target price of $184.43, suggesting a potential upside of 30.79%. Karat Packaging has a consensus target price of $36.50, suggesting a potential downside of 22.24%. Given Herc’s stronger consensus rating and higher probable upside, analysts plainly believe Herc is more favorable than Karat Packaging.
Earnings & Valuation
This table compares Herc and Karat Packaging”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Herc | $4.38 billion | 1.08 | $1.00 million | $1.47 | 95.93 |
| Karat Packaging | $467.74 million | 2.00 | $31.48 million | $2.50 | 18.78 |
Karat Packaging has lower revenue, but higher earnings than Herc. Karat Packaging is trading at a lower price-to-earnings ratio than Herc, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Herc and Karat Packaging’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Herc | 1.01% | 10.33% | 1.44% |
| Karat Packaging | 10.18% | 30.62% | 16.67% |
Summary
Karat Packaging beats Herc on 9 of the 16 factors compared between the two stocks.
About Herc
Herc Holdings Inc., together with its subsidiaries, operates as an equipment rental supplier. It rents aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction, and lighting equipment, as well as generators, and safety supplies and expendables; and provides ProSolutions, an industry specific solution based services, such as pumping solutions, power generation, climate control, remediation and restoration, and studio and production equipment. The company also sells used equipment and contractor supplies, such as construction consumables, tools, small equipment, and safety supplies; provides repair, maintenance, equipment management, and safety training services, as well as offers ancillary services, such as equipment transport, rental protection, cleaning, refueling, and labor. It serves non-residential and residential construction, specialty trade, restoration, remediation and environment, and facility maintenance contractors; industrial manufacturing industries, including automotive and aerospace, power, metals and mining, agriculture, pulp, paper and wood, food and beverage, and refineries and petrochemical industries; infrastructure and government sectors; and commercial and retail service, hospitality, healthcare, recreation, entertainment production, and special event management customers through its sales team, industry catalogs, as well as through participation and sponsorship of industry events, trade shows, and Internet. As of December 31, 2017, it operated approximately 275 locations in the United States, Canada, China, the United Kingdom, Saudi Arabia, and Qatar. Herc Holdings Inc. is based in Bonita Springs, Florida.
About Karat Packaging
Karat Packaging Inc., together with its subsidiaries, engages in the manufacture and distribution of single-use disposable products in plastic, paper, biopolymer-based, and other compostable forms used in various restaurant and foodservice settings. It provides food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other products under the Karat Earth brand. The company also provides new product development, design, printing, and logistics services. It offers its products to national and regional distributors, restaurant chains, retail establishments, and online customers. The company was founded in 2000 and is based in Chino, California.