US Reshoring And Automation Will Drive Advanced Fabrication Growth

Key Takeaways

• Accelerated synergy realization, automation gains, and reshoring trends are driving faster revenue, margin, and profitability improvements than previously projected.
  
• Strategic expansion into less cyclical, higher-value markets and technology leadership position MEC for multi-year growth, enhanced pricing power, and increased long-term operating leverage.
  
• MEC is exposed to industry disruption, competitive pressures, concentrated customers, integration risks, and cyclical end-markets, threatening revenue stability and margin sustainability despite ongoing improvement efforts.

Catalysts

Engages in the production, design, prototyping and tooling, fabrication, aluminum extrusion, coating, and assembling of aftermarket components in the United States.

• While analyst consensus expects gradually recovering revenue and margin improvements from the Accu-Fab acquisition and new market wins, the pace of revenue synergy realization is substantially ahead of expectations, with management targeting $5–10 million in revenue synergies for 2026 (two years early) and envisioning Accu-Fab revenues approaching $100 million by 2028, which could drive both revenue and EBITDA meaningfully higher and faster than currently modeled.
  
• Analyst consensus sees diversification into high-value, less cyclical markets as stabilizing long-term revenue, but accelerated wins and strong cross-selling within critical power and data center sectors (with double-digit annual growth expected), plus a pipeline of over $280 million in potential near-term strategic opportunities, point to a step-function increase in revenue base and operating leverage, supporting multi-year margin expansion and EPS upside.
  
• The sharp increase in customer reshoring and tariff-driven demand for both steel and aluminum fabrications is catalyzing a wave of new RFQs and order conversions, which, as OEMs more rapidly reorient their supply chains to the U.S., could result in above-trend order flow and recurring higher-margin revenue streams as production shifts from overseas to MEC's domestic footprint.
  
• Automation investments and operational excellence programs are enabling step changes in EBITDA margin, as evidenced by Mid-States Aluminum's jump from 20% to over 30% margins post-acquisition; with similar playbooks being rapidly executed at Accu-Fab and broader facility consolidation underway, net margins could scale far more quickly and durably as volumes recover.
  
• Persistent OEM labor shortages and rapid adoption of advanced manufacturing and digitalization are driving OEMs to partner with technology-forward suppliers, positioning MEC not only for preferred status but also for larger contract awards and greater pricing power, which can boost both revenue and profitability at a sustained, outpaced rate relative to the sector.

Mayville Engineering Company Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Mayville Engineering Company compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Mayville Engineering Company's revenue will grow by 9.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.4% today to 4.6% in 3 years time.
• The bullish analysts expect earnings to reach $31.7 million (and earnings per share of $1.73) by about August 2028, up from $17.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.9x on those 2028 earnings, up from 16.3x today. This future PE is lower than the current PE for the US Machinery industry at 24.2x.
• Analysts expect the number of shares outstanding to decline by 1.58% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.82%, as per the Simply Wall St company report.

Mayville Engineering Company Future Earnings Per Share Growth

Risks

• MEC faces long-term secular risk as automation, AI advancements, and additive manufacturing technologies accelerate, threatening demand for traditional custom metal fabrication and putting downward pressure on future revenues and margins, despite proactive cost management and operational improvement initiatives.
  
• Growing global supply chain realignment and reshoring trends, while providing some near-term opportunities, could also introduce new domestic and global competitors, eroding MEC's pricing power and squeezing net margins as OEM customers consolidate and renegotiate contracts.
  
• Elevated customer concentration remains a structural risk, with a significant portion of MEC's revenue dependent on a handful of major accounts; the loss of any large customer or sustained production cuts-evident in the commercial vehicle market, which is 38 percent of the business-could lead to sharp reductions in revenue and increased earnings volatility.
  
• While the Accu-Fab acquisition is intended to diversify end markets, integration carries execution risk, and the growing emphasis on data center and critical power markets exposes MEC to capex-intensive sectors with rapidly evolving technology, potentially straining free cash flow and requiring ongoing capital investment that may not yield forecasted returns.
  
• Persistent end-market cyclicality, as seen in agriculture, powersports, and commercial vehicles, coupled with rising input costs and uncertain regulatory/tariff environments, has led to recent sales declines (down 19 percent year over year) and margin pressures, highlighting MEC's exposure to volatile economic cycles that can depress both short
• and long-term earnings.

Valuation

• The assumed bullish price target for Mayville Engineering Company is $27.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mayville Engineering Company's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $18.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $694.9 million, earnings will come to $31.7 million, and it would be trading on a PE ratio of 20.9x, assuming you use a discount rate of 8.8%.
• Given the current share price of $14.37, the bullish analyst price target of $27.0 is 46.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.