Mayville Engineering (MEC)

Vertically integrated manufacturing solutions provider Mayville Engineering Company (NYSE:MEC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 6.6% year on year to $144.3 million. The company’s full-year revenue guidance of $545 million at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $0.10 per share was significantly above analysts’ consensus estimates.

Company Overview

Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE:MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.

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 Belden (NYSE:BDC), IDEX (NYSE:IEX), and Illinois Tool Works (NYSE:ITW).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Mayville Engineering grew its sales at a decent 7.9% compounded annual growth rate. Its growth was slightly above 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. Mayville Engineering’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 3.1% over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Commercial Vehicle and Construction & Access, which are 27.2% and 15.3% of revenue. Over the last two years, Mayville Engineering’s Commercial Vehicle revenue (exhaust, engine components, fuel systems) averaged 8.7% year-on-year declines while its Construction & Access revenue (fenders, hoods, frames for heavy machinery) averaged 11.7% declines.

This quarter, Mayville Engineering reported year-on-year revenue growth of 6.6%, and its $144.3 million of revenue exceeded Wall Street’s estimates by 2.8%.

Looking ahead, sell-side analysts expect revenue to grow 11.2% over the next 12 months, an improvement versus the last two years. This projection is admirable and indicates its newer products and services will fuel better top-line performance.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Mayville Engineering has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 12.7% gross margin over the last five years. That means Mayville Engineering paid its suppliers a lot of money ($87.28 for every $100 in revenue) to run its business.

This quarter, Mayville Engineering’s gross profit margin was 11%, down 2.8 percentage points year on year. Mayville Engineering’s full-year margin has also been trending down over the past 12 months, decreasing by 2.7 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 an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Mayville Engineering was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.2% 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, Mayville Engineering’s operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Mayville Engineering’s breakeven margin was down 4.2 percentage points year on year. Since Mayville Engineering’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.

Mayville Engineering’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

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

Sadly for Mayville Engineering, its EPS declined by more than its revenue over the last two years, dropping 52.4%. This tells us the company struggled to adjust to shrinking demand.

We can take a deeper look into Mayville Engineering’s earnings to better understand the drivers of its performance. Mayville Engineering’s operating margin has declined over the last two years. 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, Mayville Engineering reported adjusted EPS of $0.10, down from $0.21 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Mayville Engineering’s full-year EPS of $0.17 to grow 38.5%.

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.

Mayville Engineering has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.8%, subpar for an industrials business.

Taking a step back, an encouraging sign is that Mayville Engineering’s margin expanded by 9.6 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Mayville Engineering broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 11.9 percentage points lower than 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).

Mayville Engineering historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.6%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

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. Over the last few years, Mayville Engineering’s ROIC averaged 3.5 percentage point increases each year. This is a good sign, and we hope the company can continue improving.

Mayville Engineering reported $1.22 million of cash and $245.7 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 $49.12 million of EBITDA over the last 12 months, we view Mayville Engineering’s 5.0× net-debt-to-EBITDA ratio as safe. We also see its $1.55 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.

It was good to see Mayville Engineering beat analysts’ EPS expectations this quarter. We were also glad its Construction & Access revenue topped Wall Street’s estimates. On the other hand, its Commercial Vehicle revenue missed. Zooming out, we think this was a solid print. Investors were likely hoping for more, and shares traded down 3% to $17.49 immediately after reporting.

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

Before making an investment decision, investors should account for Mayville Engineering’s business fundamentals and valuation in addition to what happened in the latest quarter.

Mayville Engineering isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was decent over the last five years and is expected to accelerate over the next 12 months, its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s rising cash profitability gives it more optionality, the downside is its low gross margins indicate some combination of competitive pressures and high production costs.

Mayville Engineering’s P/E ratio based on the next 12 months is 65.6x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $23.60 on the company (compared to the current share price of $16.92).

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.