NN (NNBR)

Industrial components supplier NN (NASDAQ:NNBR) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 8.5% year on year to $103.9 million. The company’s full-year revenue guidance of $430 million at the midpoint came in 1% below analysts’ estimates. Its non-GAAP loss of $0.01 per share was $0.03 below analysts’ consensus estimates.

Company Overview

Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.

Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Barnes (NYSE:B), Timken (NYSE:TKR), and RBC Bearings (NYSE:RBC).

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, NN struggled to consistently increase demand as its $424 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. NN’s recent performance shows its demand remained suppressed as its revenue has declined by 7.4% annually over the last two years.

This quarter, NN missed Wall Street’s estimates and reported a rather uninspiring 8.5% year-on-year revenue decline, generating $103.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4.8% 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.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

NN has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 16.2% gross margin over the last five years. That means NN paid its suppliers a lot of money ($83.80 for every $100 in revenue) to run its business.

This quarter, NN’s gross profit margin was 16.8%, marking a 2.3 percentage point increase from 14.5% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

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.

NN’s high expenses have contributed to an average operating margin of negative 3.4% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, NN’s operating margin decreased by 4.3 percentage points over the last five years. NN’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, NN generated a negative 2.2% operating margin. The company's consistent lack of profits raise a flag.

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.

Sadly for NN, its EPS declined by 18.8% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Diving into the nuances of NN’s earnings can give us a better understanding of its performance. As we mentioned earlier, NN’s operating margin expanded this quarter but declined by 4.3 percentage points over the last five years. Its share count also grew by 17.5%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

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

For NN, its two-year annual EPS growth of 64.1% was higher than its five-year trend. Its improving earnings is an encouraging data point, but a caveat is that its EPS is still in the red.

In Q3, NN reported adjusted EPS of negative $0.01, up from negative $0.05 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast NN’s full-year EPS of negative $0.04 will flip to positive $0.08.

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 NN posted positive free cash flow this quarter, the broader story hasn’t been so clean. NN’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 1.3%, meaning it lit $1.26 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that NN’s margin expanded by 3.2 percentage points during that time. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

NN’s free cash flow clocked in at $7.70 million in Q3, equivalent to a 7.4% margin. Its cash flow turned positive after being negative in the same quarter last year, marking a potential inflection point.

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).

NN’s five-year average ROIC was negative 6.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the industrials sector.

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, NN’s ROIC averaged 4.1 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

NN reported $12.22 million of cash and $199.4 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 $48.18 million of EBITDA over the last 12 months, we view NN’s 3.9× net-debt-to-EBITDA ratio as safe. We also see its $10.64 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 NN’s optimistic full-year EBITDA guidance, which blew past analysts’ expectations. On the other hand, its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 10.1% to $1.70 immediately after reporting.

Updated: December 3, 2025 at 10:35 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 NN.

We see the value of companies helping their customers, but in the case of NN, we’re out. To kick things off, its revenue growth was weak 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 relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

NN’s P/E ratio based on the next 12 months is 28.6x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $5.75 on the company (compared to the current share price of $1.30).

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.