Shyft (SHYF)

Vehicle manufacturer Shyft (NASDAQ:SHYF) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 3.4% year on year to $204.6 million. The company’s full-year revenue guidance of $920 million at the midpoint came in 3.8% above analysts’ estimates. Its non-GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.

Company Overview

Notably receiving an order from FedEx for electric vehicles, Shyft (NASDAQ:SHYF) offers specialty vehicles and truck bodies for various industries.

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 REV (NASDAQ:REVG), Thor (NYSE:THO), and Oshkosh (NYSE:OSK).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Shyft struggled to consistently increase demand as its $792.9 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.

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. Shyft’s recent performance shows its demand remained suppressed as its revenue has declined by 13.7% annually over the last two years. Shyft isn’t alone in its struggles as the Heavy Transportation Equipment industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Fleet Vehicles and Specialty Vehicles , which are 47% and 40.2% of revenue. Over the last two years, Shyft’s Fleet Vehicles revenue (commercial delivery vehicles) averaged 20.1% year-on-year declines while its Specialty Vehicles revenue ( RV chassis and truck bodies) averaged 4.6% declines.

This quarter, Shyft reported modest year-on-year revenue growth of 3.4% but beat Wall Street’s estimates by 2.8%.

Looking ahead, sell-side analysts expect revenue to grow 15.5% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will catalyze better top-line performance.

Shyft has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 19.1% gross margin over the last five years. That means Shyft paid its suppliers a lot of money ($80.88 for every $100 in revenue) to run its business.

This quarter, Shyft’s gross profit margin was 19.7%, marking a 2.5 percentage point increase from 17.2% in the same quarter last year. Shyft’s full-year margin has also been trending up over the past 12 months, increasing by 3.5 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.

Shyft was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Shyft’s operating margin decreased by 6.2 percentage points over the last five years. Shyft’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.

This quarter, Shyft’s breakeven margin was up 1.8 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

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 Shyft, its EPS declined by 15.8% 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.

We can take a deeper look into Shyft’s earnings to better understand the drivers of its performance. As we mentioned earlier, Shyft’s operating margin improved this quarter but declined by 6.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses 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 Shyft, its two-year annual EPS declines of 38.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Shyft reported EPS at $0.07, up from negative $0.04 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Shyft’s full-year EPS of $0.55 to grow 96.9%.

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.

Shyft has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.8%, lousy for an industrials business.

Taking a step back, we can see that Shyft’s margin dropped by 6.8 percentage points during that time. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s in the middle of a big investment cycle.

Shyft burned through $9.50 million of cash in Q1, equivalent to a negative 4.6% margin. The company’s cash burn was in line with the same quarter last year and is a deviation 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).

Shyft’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 11%, 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, Shyft’s ROIC has decreased significantly 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.

Shyft reported $16.17 million of cash and $192.1 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 $55.04 million of EBITDA over the last 12 months, we view Shyft’s 3.2× net-debt-to-EBITDA ratio as safe. We also see its $9.15 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 Shyft blew past analysts’ EPS and EBITDA expectations this quarter. We were also excited its full-year EBITDA guidance and revenue outperformed Wall Street’s estimates. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 7% to $7.80 immediately following the results.

Updated: July 10, 2025 at 12:11 AM EDT

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 Shyft.

We see the value of companies helping their customers, but in the case of Shyft, we’re out. To begin with, 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 diminishing returns show management's prior bets haven't worked out. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Shyft’s P/E ratio based on the next 12 months is 11.7x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment.