MasterCraft (MCFT)

Sport boat manufacturer MasterCraft (NASDAQ:MCFT) fell short of the market’s revenue expectations in Q4 CY2025 as sales only rose 1.9% year on year to $64.57 million. Its non-GAAP profit of $0.10 per share was 39.1% below analysts’ consensus estimates.

Company Overview

Started by a waterskiing instructor, MasterCraft (NASDAQ:MCFT) specializes in designing, manufacturing, and selling sport boats.

Leisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.

Competitors in the recreational watercraft industry include Brunswick (NYSE:BC), Malibu Boats (NASDAQ:MBUU), and Marine Products (NYSE:MPX).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. MasterCraft’s demand was weak over the last five years as its sales fell at a 5.1% annual rate. This was below our standards and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. MasterCraft’s recent performance shows its demand remained suppressed as its revenue has declined by 25.3% annually over the last two years.

This quarter, MasterCraft’s revenue grew by 1.9% year on year to $64.57 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.6% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

MasterCraft’s operating margin has been trending up over the last 12 months and averaged 4.5% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports inadequate profitability for a consumer discretionary business.

This quarter, MasterCraft generated an operating margin profit margin of 5.8%, up 5.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for MasterCraft, its EPS declined by 8.6% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

In Q4, MasterCraft reported adjusted EPS of $0.10, in line with the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects MasterCraft’s full-year EPS of $1.08 to grow 21.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

MasterCraft has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.1%, lousy for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

MasterCraft historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 32.7%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

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, MasterCraft’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. Still, the stock traded up 2.1% to $23.60 immediately after reporting.

Updated: February 5, 2026 at 7:54 AM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own MasterCraft, you should also grasp the company’s longer-term business quality and valuation.

MasterCraft doesn’t pass our quality test. First off, its revenue has declined over the last five years. On top of that, MasterCraft’s number of boats sold has disappointed, and its declining EPS over the last five years makes it a less attractive asset to the public markets.

MasterCraft’s P/E ratio based on the next 12 months is 17.7x. This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $22.80 on the company (compared to the current share price of $23.60), implying they don’t see much short-term potential in MasterCraft.