Alta (ALTG)

Equipment distribution company Alta Equipment Group (NYSE:ALTG) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 5.8% year on year to $422.6 million. Its non-GAAP loss of $0.35 per share was significantly below analysts’ consensus estimates.

Company Overview

Founded in 1984, Alta Equipment Group (NYSE:ALTG) is a provider of industrial and construction equipment and services across the Midwest and Northeast United States.

Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.

Public competitors in the industrial and construction equipment industry include United Rentals (NYSE:URI), Caterpillar (NYSE:CAT), and H&E Equipment Services (NASDAQ:HEES).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Alta’s 19.1% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Alta’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1.1% over the last two years was well below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Equipment and Parts, which are 50% and 17.8% of revenue. Over the last two years, Alta’s Equipment revenue (new and used) averaged 1.3% year-on-year declines while its Parts revenue (maintenance and repair products) averaged 1.6% declines.

This quarter, Alta missed Wall Street’s estimates and reported a rather uninspiring 5.8% year-on-year revenue decline, generating $422.6 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Alta has bad unit economics for an industrials company, giving it less room to reinvest and develop new offerings. As you can see below, it averaged a 26.4% gross margin over the last five years. Said differently, Alta had to pay a chunky $73.55 to its suppliers for every $100 in revenue.

Alta’s gross profit margin came in at 27.9% this quarter, in line with the same quarter last year. Zooming out, Alta’s full-year margin has been trending down over the past 12 months, decreasing by 1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and 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.

Alta’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 1.7% over the last five years. This profitability was lousy for an industrials business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, Alta’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Alta generated an operating margin profit margin of 1.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

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.

Alta’s earnings losses deepened over the last five years as its EPS dropped 26.1% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Alta’s low margin of safety could leave its stock price susceptible to large downswings.

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

Sadly for Alta, its EPS declined by 105% annually over the last two years while its revenue grew by 1.1%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Alta’s earnings can give us a better understanding of its performance. While we mentioned earlier that Alta’s operating margin was flat this quarter, a two-year view shows its margin has declined. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Alta reported adjusted EPS of negative $0.35, up from negative $0.72 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Alta to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.38 will advance to negative $0.56.

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.

Alta’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 1.7%, meaning it lit $1.67 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Alta’s margin expanded by 1.5 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise.

Alta burned through $13.2 million of cash in Q3, equivalent to a negative 3.1% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

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).

Alta historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2.5%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

Alta reported $14.1 million of cash and $827.9 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 $164.5 million of EBITDA over the last 12 months, we view Alta’s 4.9× net-debt-to-EBITDA ratio as safe. We also see its $89.6 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 revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 5.9% to $5.54 immediately after reporting.

Updated: December 4, 2025 at 10:22 PM EST

Before investing in or passing on Alta, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

We see the value of companies helping their customers, but in the case of Alta, we’re out. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets.

Alta’s EV-to-EBITDA ratio based on the next 12 months is 0.9x. 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.

Wall Street analysts have a consensus one-year price target of $9.95 on the company (compared to the current share price of $4.95).

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.