Mister Car Wash (MCW)

Conveyorized car wash service company Mister Car Wash (NYSE:MCW) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 9.4% year on year to $261.7 million. The company expects the full year’s revenue to be around $1.06 billion, close to analysts’ estimates. Its non-GAAP profit of $0.11 per share was in line with analysts’ consensus estimates.

Company Overview

Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.

Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.

Competitors offering conveyorized car washes and detailing services include private companies Autobell Car Wash, Zips Car Wash, and Wash Depot Holdings.

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. Unfortunately, Mister Car Wash’s 9.9% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the consumer discretionary sector and is a tough starting point for our analysis.

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. Mister Car Wash’s recent performance shows its demand has slowed as its annualized revenue growth of 7.3% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Mister Car Wash’s same-store sales averaged 2.6% year-on-year growth. Because this number is lower than its revenue growth, we can see the opening of new locations is boosting the company’s top-line performance.

This quarter, Mister Car Wash reported year-on-year revenue growth of 9.4%, and its $261.7 million of revenue exceeded Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

Mister Car Wash’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 18.6% over the last two years. This profitability was top-notch for a consumer discretionary business, showing it’s an well-run company with an efficient cost structure.

This quarter, Mister Car Wash generated an operating profit margin of 20.2%, up 2.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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.

Mister Car Wash’s EPS grew at a remarkable 20.2% compounded annual growth rate over the last five years, higher than its 9.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q1, Mister Car Wash reported EPS at $0.11, up from $0.08 in the same quarter last year. This print beat analysts’ estimates by 8.3%. Over the next 12 months, Wall Street expects Mister Car Wash to perform poorly. Analysts forecast its full-year EPS of $0.40 will hit $0.45.

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.

While Mister Car Wash posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, Mister Car Wash’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 8.6%, meaning it lit $8.55 of cash on fire for every $100 in revenue. This is a stark contrast from its operating margin, and its investments in working capital/capital expenditures are the primary culprit.

Mister Car Wash’s free cash flow clocked in at $32.47 million in Q1, equivalent to a 12.4% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

Over the next year, analysts predict Mister Car Wash’s cash burn will increase. Their consensus estimates imply its free cash flow margin of negative 2.5% for the last 12 months will fall to negative 9.4%.

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).

Mister Car Wash historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 10.3%, 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, Mister Car Wash’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Mister Car Wash burned through $25.14 million of cash over the last year, and its $1.79 billion of debt exceeds the $39.13 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Mister Car Wash’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Mister Car Wash until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We enjoyed seeing Mister Car Wash beat analysts’ same-store sales expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance was in line. Overall, this quarter had some key positives. The stock traded up 3.4% to $7.09 immediately following the results.

Updated: July 10, 2025 at 10:09 PM EDT

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies serving everyday consumers, but in the case of Mister Car Wash, we’ll be cheering from the sidelines. First off, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its strong operating margins show it’s a well-run business, the downside is its Forecasted free cash flow margin suggests the company will ramp up its investments next year. On top of that, its cash burn raises the question of whether it can sustainably maintain growth.

Mister Car Wash’s P/E ratio based on the next 12 months is 15x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $9.38 on the company (compared to the current share price of $6.80).

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.