Universal Technical Institute (UTI)

Vocational education Universal Technical Institute (NYSE:UTI) announced better-than-expected revenue in Q3 CY2025, with sales up 13.3% year on year to $222.4 million. The company’s full-year revenue guidance of $910 million at the midpoint came in 0.9% above analysts’ estimates. Its GAAP profit of $0.34 per share was 32.5% above analysts’ consensus estimates.

Company Overview

Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.

A whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.

Universal Technical Institute’s primary competitors include Lincoln Educational Services (NASDAQ:LINC), Adtalem Global Education (NYSE:ATGE), Strategic Education (NASDAQ:STRA), Chegg (NYSE:CHGG), and private companies WyoTech and Ohio Technical College.

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Universal Technical Institute’s 22.7% annualized revenue growth over the last five years was impressive. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Universal Technical Institute’s annualized revenue growth of 17.3% over the last two years is below its five-year trend, but we still think the results were respectable.

Universal Technical Institute also discloses its number of new students, which reached 12,109 in the latest quarter. Over the last two years, Universal Technical Institute’s new students averaged 21.9% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Universal Technical Institute reported year-on-year revenue growth of 13.3%, and its $222.4 million of revenue exceeded Wall Street’s estimates by 1.3%.

Looking ahead, sell-side analysts expect revenue to grow 7.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Universal Technical Institute’s operating margin has risen over the last 12 months and averaged 9.1% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports mediocre profitability for a consumer discretionary business.

In Q3, Universal Technical Institute generated an operating margin profit margin of 11.2%, down 2 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

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.

Universal Technical Institute’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.

In Q3, Universal Technical Institute reported EPS of $0.34, in line with 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 Universal Technical Institute’s full-year EPS of $1.14 to shrink by 17.5%.

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.

Universal Technical Institute has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.5%, subpar for a consumer discretionary business.

Universal Technical Institute’s free cash flow clocked in at $40.63 million in Q3, equivalent to a 18.3% margin. The company’s cash profitability regressed as it was 12.3 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.

Over the next year, analysts predict Universal Technical Institute’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 6.6% for the last 12 months will decrease to 4.4%.

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).

Universal Technical Institute historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 12.2%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

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, Universal Technical Institute’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

Universal Technical Institute reported $175.9 million of cash and $278.9 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 $126.5 million of EBITDA over the last 12 months, we view Universal Technical Institute’s 0.8× net-debt-to-EBITDA ratio as safe. We also see its $322,000 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 Universal Technical Institute beat analysts’ EPS expectations this quarter. We were also glad its full-year revenue guidance slightly exceeded Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 1.5% to $29.07 immediately after reporting.

Updated: December 4, 2025 at 10:07 PM EST

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

Universal Technical Institute falls short of our quality standards. To begin with, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate 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 Forecasted free cash flow margin suggests the company will ramp up its investments next year. On top of that, its projected EPS for the next year is lacking.

Universal Technical Institute’s EV-to-EBITDA ratio based on the next 12 months is 12x. At this valuation, there’s 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 $37.33 on the company (compared to the current share price of $25.96).

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.