MEC: Data Center Expansion Will Drive Higher Margins And Share Upside

Analysts have modestly lifted their price target on Mayville Engineering Company to approximately $24 per share from about $23.60, citing expectations for improving long term revenue growth, slightly lower discount rates, and the potential for higher margin, data center related business to drive an upward re rating in the stock over time.

Analyst Commentary

Analysts view Mayville Engineering as a differentiated way to gain exposure to accelerating data center capital spending, with the recent Accu-Fab acquisition expanding its addressable market and shifting the mix toward structurally higher margin work.

Given the upgraded price target and the potential for a step change in earnings power, recent research focuses on how effectively the company can execute on this strategy and how quickly the market will reflect the improved outlook in the valuation.

Bullish Takeaways

• Bullish analysts see the data center end market becoming a leading revenue contributor over the next several years, materially extending Mayville Engineering's growth runway beyond its traditional industrial base.
• The higher margin profile of data center related work is expected to lift overall profitability, which some analysts believe could support multiple expansion toward peers that already benefit from similar exposure.
• The acquisition driven entry into data center supply chains provides immediate customer access, which bullish analysts believe can accelerate revenue scaling and drive a positive earnings revision cycle.
• If execution is strong, bullish scenarios suggest the stock could ultimately be valued closer to other data center beneficiaries, which some analysts view as implying meaningful upside relative to current price targets.

Bearish Takeaways

• Bearish analysts caution that the transition toward data center revenue could be slower than expected, which would delay the anticipated uplift in growth and margins embedded in current models.
• There is execution risk around integrating the Accu-Fab acquisition and ramping complex data center programs, creating potential for cost overruns or margin pressure if timelines slip.
• Some are wary that the market may already be pricing in a portion of the data center opportunity, which could limit further re-rating if incremental wins and profitability improvements are not clearly demonstrated.
• Macro or cycle driven pullbacks in data center spending could compress expected volumes, leaving the company with a less favorable mix and challenging the more aggressive valuation cases.

What's in the News

• Reiterated full year 2025 net sales guidance in the range of $528 million to $562 million, underscoring management's confidence in the current demand and execution outlook (Key Developments).
• Updated share repurchase activity indicates completion of 644,441 shares bought back for $10.59 million under the program announced November 1, 2023, with no additional shares repurchased in the July 1 to September 30, 2025 period (Key Developments).

Valuation Changes

• Fair Value: Unchanged at approximately $23.60 per share, indicating no revision to the core valuation estimate.
• Discount Rate: Fallen slightly from about 10.32 percent to roughly 10.16 percent, reflecting a modestly lower perceived risk profile or cost of capital.
• Revenue Growth: Risen slightly from around 9.90 percent to approximately 10.05 percent, signaling a marginally more optimistic long term growth outlook.
• Net Profit Margin: Edged down marginally from about 2.62 percent to roughly 2.61 percent, suggesting a nearly flat but very slightly more conservative profitability assumption.
• Future P/E: Decreased slightly from roughly 34.2x to about 34.0x, implying a modestly lower multiple applied to forward earnings in the updated model.