Douglas Dynamics (PLOW)

Snow and ice equipment company Douglas Dynamics (NYSE:PLOW) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 25.3% year on year to $162.1 million. On the other hand, the company’s full-year revenue guidance of $647.5 million at the midpoint came in 1.3% above analysts’ estimates. Its non-GAAP profit of $0.40 per share was in line with analysts’ consensus estimates.

Company Overview

Once manufacturing snowplows designed for the iconic jeep vehicle precursor, Douglas Dynamics (NYSE:PLOW) offers snow and ice equipment for the roads and sidewalks.

Douglas Dynamics was founded in 1977 and began as a manufacturer of vehicle attachments and equipment. The company has significantly grown through acquisitions that have enabled it to enter new markets and expand from its original singular offering. For example, the $206 million acquisition of Dejana Truck & Utility Equipment in 2016 enabled it to offer custom upfitting services which reduced its dependency on seasonal weather patterns by diversifying its product offerings and expanding into year-round markets.

Douglas Dynamics specializes in producing equipment designed to manage snow on roads and sidewalks. Specifically, the company offers snowplows used to clear snow from roads and driveways as well as salt and sand spreaders which help to manage ice on roads and walkways. It does not provide the service of clearing snow, rather, it only provides the equipment needed.

Beyond its core offerings, the company also offers truck and utility vehicle attachments (dump bodies and service bodies to carry heavy things), material spreaders for landscaping and agricultural applications, and custom upfitting services for commercial vehicles. For example, some of its custom upfitting services include installing storage units such as toolboxes and shelving or adding equipment like cranes and lift gates to utility trucks.

It sells its products through direct sales and long-term contracts. These contracts typically span three to five years and often include service agreements for maintenance and support, ensuring the equipment stays in great condition.

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Competitors offering similar products include Caterpillar (NYSE:CAT), Toro (NYSE:TTC), and Alamo (NYSE:ALG).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Douglas Dynamics grew its sales at a tepid 5% compounded annual growth rate. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Douglas Dynamics’s recent performance shows its demand has slowed as its annualized revenue growth of 1.8% over the last two years was below its five-year trend. We also note many other Heavy Transportation Equipment businesses have faced declining sales because of cyclical headwinds. While Douglas Dynamics grew slower than we’d like, it did do better than its peers.

This quarter, Douglas Dynamics generated an excellent 25.3% year-on-year revenue growth rate, but its $162.1 million of revenue fell short of Wall Street’s high expectations.

Looking ahead, sell-side analysts expect revenue to grow 9.9% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will catalyze better top-line performance.

Douglas Dynamics has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 25.7% gross margin over the last five years. Said differently, Douglas Dynamics had to pay a chunky $74.34 to its suppliers for every $100 in revenue.

Douglas Dynamics produced a 23.5% gross profit margin in Q3, in line with the same quarter last year. Zooming out, Douglas Dynamics’s full-year margin has been trending up over the past 12 months, increasing by 1.2 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Douglas Dynamics has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.8%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Douglas Dynamics’s operating margin decreased by 1.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Douglas Dynamics generated an operating margin profit margin of 8.7%, up 5.9 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Douglas Dynamics’s EPS grew at a remarkable 12.3% compounded annual growth rate over the last five years, higher than its 5% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Douglas Dynamics, its two-year annual EPS growth of 23.2% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Douglas Dynamics reported adjusted EPS of $0.40, up from $0.24 in the same quarter last year. This print beat analysts’ estimates by 1.7%. Over the next 12 months, Wall Street expects Douglas Dynamics’s full-year EPS of $2.02 to grow 9.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Douglas Dynamics has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.4%, subpar for an industrials business.

Taking a step back, we can see that Douglas Dynamics’s margin dropped by 2.2 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s in the middle of an investment cycle.

Douglas Dynamics burned through $11.45 million of cash in Q3, equivalent to a negative 7.1% margin. The company’s cash burn was similar to its $15.39 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Douglas Dynamics’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.2%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Douglas Dynamics’s ROIC averaged 3.5 percentage point decreases over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Douglas Dynamics reported $10.65 million of cash and $275.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $73.92 million of EBITDA over the last 12 months, we view Douglas Dynamics’s 3.6× net-debt-to-EBITDA ratio as safe. We also see its $4.74 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Douglas Dynamics blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 1.8% to $29.10 immediately following the results.

Updated: December 4, 2025 at 10:46 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Douglas Dynamics.

Douglas Dynamics’s business quality ultimately falls short of our standards. To kick things off, its revenue growth was uninspiring over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its cash profitability fell over the last five years.

Douglas Dynamics’s P/E ratio based on the next 12 months is 13.6x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $38.75 on the company (compared to the current share price of $32.17).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.