Universal Technical Institute (UTI)

Vocational education Universal Technical Institute (NYSE:UTI) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 15.1% year on year to $204.3 million. The company expects the full year’s revenue to be around $832.5 million, close to analysts’ estimates. Its GAAP profit of $0.19 per share was 72.7% 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.

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Universal Technical Institute grew its sales at an impressive 21% compounded annual growth rate. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Universal Technical Institute’s annualized revenue growth of 21.6% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

We can better understand the company’s revenue dynamics by analyzing its number of new students, which reached 5,721 in the latest quarter. Over the last two years, Universal Technical Institute’s new students averaged 30.5% 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 15.1%, and its $204.3 million of revenue exceeded Wall Street’s estimates by 2%.

Looking ahead, sell-side analysts expect revenue to grow 8.5% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

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.

Universal Technical Institute’s operating margin has risen over the last 12 months and averaged 8.4% 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 Q2, Universal Technical Institute generated an operating margin profit margin of 6.9%, up 2.7 percentage points year on year. This increase was a welcome development and shows it was more efficient.

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 Q2, Universal Technical Institute reported EPS at $0.19, up from $0.09 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 Universal Technical Institute’s full-year EPS of $1.14 to shrink by 10.2%.

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.

Universal Technical Institute has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.8%, subpar for a consumer discretionary business.

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).

Universal Technical Institute historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 11.8%, 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 averaged 1.6 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Universal Technical Institute reported $117.8 million of cash and $261 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 $128.2 million of EBITDA over the last 12 months, we view Universal Technical Institute’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $788,000 of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Universal Technical Institute blew past analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its number of new students missed. Overall, we think this was a decent quarter with some key metrics above expectations. Investors were likely hoping for more, and shares traded down 2.1% to $32.70 immediately following the results.

Updated: November 14, 2025 at 9:07 PM EST

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 Universal Technical Institute.

We cheer for all companies serving everyday consumers, but in the case of Universal Technical Institute, we’ll be cheering from the sidelines. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its Forecasted free cash flow margin suggests the company will ramp up its investments next year. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking.

Universal Technical Institute’s EV-to-EBITDA ratio based on the next 12 months is 14.2x. This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $37.33 on the company (compared to the current share price of $29.46).

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.