The Best Stock to Play a Renters Paradise

Welcome to the United States of renters!

Since the recession, nearly every aspect of the rental industry has been on fire. Car rental company Dollar Thrifty Automotive Group (NYS: DTG) , once on its last leg, is now very profitable and up an astonishing 12,195% since hitting a low of $0.62 three years ago. Similarly, AMERCO (NAS: UHAL) , the parent of self-moving company U-Haul, reported self-moving equipment rentals jumped 10% in the third quarter.

Even apartment REITs are getting in on the action, with fewer Americans choosing to buy homes. AvalonBay Communities (NYS: AVB) saw its fiscal 2011 total revenue rise 6.2%, with funds from operations jumping 14.3% for the year.

There are more than a dozen different stocks you could buy to play the rental and leasing sector, but none stands out to me more than Mobile Mini (NAS: MINI) , one of the few rental and leasing companies to actually miss on its recent earnings results.

Mobile Mini leases nearly 240,000 mobile storage units, so I'd hardly call the company "Mini" by any means. The company's business platform draws from multiple sectors, with construction companies, retailers, and John Q. Public all using Mobile Mini's storage products.

In its most recently reported quarter, Mobile Mini's total revenue grew 9.5% on the heels of an 11.5% rise in leasing revenue. Sales revenue ticked up a more modest 1.5%. While these results might seem tame, there are a lot of positives to take from its results.

Nearly every important metric showed growth for the year. Total revenue, sales revenue, sales gross margin, leasing revenue, and free cash flow all rose nicely. In fact, leasing revenue improved sequentially over the year-ago period in every quarter this year -- from 3.6% in Q1, to 7.6% in Q2, to 9.3% in Q3, and finally 11.5% in the fourth quarter.

Still, it's easy for pessimists to come down hard on Mobile Mini because of the large amount of debt it carries on its balance sheet ($708 million). But Mobile Mini has made big strides in this department. Since it purchased Mobile Storage Group in 2008, it has paid down $235 million, or one-quarter of its then-outstanding debt. It also refinanced its revolving credit line this past quarter for a savings of half a percentage point.

Mobile Mini looks poised to grow whether or not the economy is booming and should continue to see strength from all of its business segments. Projected to grow at 14% over the next five years, I feel that even with it trading at 21 times forward earnings, the company is a bargain over the long term. If Mobile Mini can maintain discipline regarding acquisitions and continues to use its free cash flow to pay off its debt, in a few years, there's a possibility shareholders could even receive a dividend. With that said, I plan to make a CAPScall of outperform on Mobile Mini.

Disagree with me? Share your opinion with your fellow Fools in the comments section below, and consider adding Mobile Mini to your free and personalized watchlist.

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At the time thisarticle was published Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Mobile Mini. Motley Fool newsletter services have recommended buying shares of Mobile Mini. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that only stores transparency.

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