Subscription Models And Urbanization Will Expand Market Reach

Key Takeaways

• Expansion of store footprint, along with effective M&A strategy, is expected to significantly outpace market growth and strengthen competitive position.
  
• Enhanced premium offerings and focus on subscription services aim to boost recurring revenue, gross margins, and overall customer retention.
  
• Emerging risks from new vehicle technologies, market saturation, regulatory pressures, and shifting consumer behaviors could suppress Mister Car Wash's growth and earnings stability over time.

Catalysts

Provides conveyorized car wash services in the United States.

• While analyst consensus expects Mister Car Wash's store expansion to deliver steady growth, management's confidence in doubling the current footprint to 1,000 stores over time suggests long-term expansion could exceed current projections, dramatically scaling total revenue and earnings well beyond street expectations.
  
• Analysts broadly cite premiumization as a positive, but the accelerating cadence of new high-value service introductions-building on the already successful Titanium tier-could cultivate a lasting upsell cycle, driving a sustained step-change in revenue per member and boosting gross margins over a multi-year runway.
  
• The rapid consumer shift toward convenient, subscription-based services positions Mister Car Wash's Unlimited Wash Club to further increase its share of total sales and stabilize cash flows, enabling the company to raise prices more frequently and reliably expand margins as consumer adoption deepens.
  
• Industry consolidation is accelerating, and Mister's scale, superior balance sheet, and proven integration expertise uniquely position it to capitalize on distressed or undervalued M&A opportunities, unlocking both immediate synergies and regional dominance-thereby driving sudden inflections in earnings through acquired market share.
  
• Ongoing investments in operational technology and best-in-class maintenance reinforce Mister's competitive moat in urban, high-density markets-where rising auto prices make consumers more committed to maintaining vehicle value-allowing for greater throughput, higher service frequency, and steadily expanding net margins over time.

Mister Car Wash Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Mister Car Wash compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Mister Car Wash's revenue will grow by 7.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.5% today to 16.6% in 3 years time.
• The bullish analysts expect earnings to reach $214.6 million (and earnings per share of $0.63) by about August 2028, up from $87.1 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 22.3x on those 2028 earnings, up from 21.5x today. This future PE is greater than the current PE for the US Consumer Services industry at 17.4x.
• Analysts expect the number of shares outstanding to grow by 1.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.99%, as per the Simply Wall St company report.

Mister Car Wash Future Earnings Per Share Growth

Risks

• Long-term risks from increased adoption of electric vehicles with self-cleaning technologies or advanced coatings could reduce demand for frequent professional car washes, posing a threat to Mister Car Wash's long-term revenue and volume growth.
  
• Structural shifts such as declining car ownership, increased urbanization, and growth of alternatives like ride-sharing or micro-mobility may shrink the addressable customer base over time, limiting Mister Car Wash's capacity to maintain or grow revenues.
  
• Accelerating environmental regulations focused on water usage, chemical runoff, and sustainability could result in higher operating and compliance costs, which would put downward pressure on net margins and could restrain further expansion.
  
• Mister Car Wash is experiencing market saturation and cannibalization in more mature geographies, as acknowledged by slower ramp in new store performance due to denser competition and self-cannibalization, which may suppress same-store sales growth and compress long-term revenue growth rates.
  
• The company's heavy reliance on its membership/subscription model exposes it to elevated churn risk and revenue volatility if economic conditions deteriorate or if consumer preferences shift toward at-home car care or away from subscriptions, threatening future earnings stability.

Valuation

• The assumed bullish price target for Mister Car Wash is $10.74, which represents two standard deviations above the consensus price target of $8.27. This valuation is based on what can be assumed as the expectations of Mister Car Wash'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 $11.0, and the most bearish reporting a price target of just $6.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $214.6 million, and it would be trading on a PE ratio of 22.3x, assuming you use a discount rate of 9.0%.
  
• Given the current share price of $5.72, the bullish analyst price target of $10.74 is 46.7% 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.