Park-Ohio (PKOH)

Diversified manufacturing and supply chain services provider Park-Ohio (NASDAQ:PKOH) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 4.5% year on year to $398.6 million. The company’s full-year revenue guidance of $1.61 billion at the midpoint came in 1.1% below analysts’ estimates. Its non-GAAP profit of $0.65 per share was 21.7% below analysts’ consensus estimates.

Company Overview

Based in Cleveland, Park-Ohio (NASDAQ:PKOH) provides supply chain management services, capital equipment, and manufactured components.

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 of Park-Ohio include NN (NASDAQ:NNBR), Lawson Products (NASDAQ:LAWS), and DXP Enterprises (NASDAQ:DXPE).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Park-Ohio grew its sales at a sluggish 3.9% compounded annual growth rate. This was below our standard for the industrials sector and is a rough starting point 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. Park-Ohio’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.8% annually.

This quarter, Park-Ohio missed Wall Street’s estimates and reported a rather uninspiring 4.5% year-on-year revenue decline, generating $398.6 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

Park-Ohio has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 15.5% gross margin over the last five years. Said differently, Park-Ohio had to pay a chunky $84.50 to its suppliers for every $100 in revenue.

Park-Ohio’s gross profit margin came in at 16.7% this quarter, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Park-Ohio was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.6% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Park-Ohio’s operating margin rose by 2.5 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Park-Ohio generated an operating margin profit margin of 4.3%, down 1.8 percentage points year on year. Since Park-Ohio’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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.

Park-Ohio’s EPS grew at an astounding 83.8% compounded annual growth rate over the last five years, higher than its 3.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Park-Ohio’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Park-Ohio’s operating margin declined this quarter but expanded by 2.5 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

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

For Park-Ohio, its two-year annual EPS growth of 5.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Park-Ohio reported adjusted EPS of $0.65, down from $1.07 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Park-Ohio’s full-year EPS of $2.73 to grow 16.8%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

While Park-Ohio posted positive free cash flow this quarter, the broader story hasn’t been so clean. Park-Ohio’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.

Park-Ohio’s free cash flow clocked in at $6.6 million in Q3, equivalent to a 1.7% margin. This result was good as its margin was 1.7 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

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).

Park-Ohio historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.6%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

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. Fortunately, Park-Ohio’s ROIC averaged 2.1 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

Park-Ohio reported $50.8 million of cash and $709.9 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 $140.3 million of EBITDA over the last 12 months, we view Park-Ohio’s 4.7× net-debt-to-EBITDA ratio as safe. We also see its $46.1 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 struggled to find many positives in these results. Its full-year EPS guidance missed and its revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 9.9% to $19 immediately following the results.

Updated: December 3, 2025 at 10:15 PM EST

Before deciding whether to buy Park-Ohio or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We see the value of companies helping their customers, but in the case of Park-Ohio, we’re out. For starters, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its cash burn raises the question of whether it can sustainably maintain growth. On top of that, its low gross margins indicate some combination of competitive pressures and high production costs.

Park-Ohio’s P/E ratio based on the next 12 months is 6.6x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment.