MCW: Future Membership Stabilization Will Drive Recovery Amid Recent Weakness

Key Takeaways

• Strong subscription-based model and ongoing innovation drive customer retention, margin expansion, and higher revenue per member.
  
• Industry consolidation and environmental initiatives enhance competitive positioning, market share, and stability against evolving regulations.
  
• Heavy reliance on memberships, slowing site growth, competitive pressures, and rising operating costs threaten Mister Car Wash's revenue stability and margin performance.

Catalysts

Provides conveyorized car wash services in the United States.

• Mister Car Wash's resilient and growing membership subscription base (UWC) provides predictable, recurring revenue and demonstrates strong customer retention, particularly as consumers increasingly value convenience and subscription services; continued price optimization and tier upgrades (e.g., growth in Titanium tier) are expected to further lift revenue per member and expand margins over time.
  
• Industry consolidation and the recent rationalization of new competitors-highlighted by fewer aggressive new entrants, distressed competitor exits, and more rational pricing-are expected to improve Mister Car Wash's market share, competitive positioning, and pricing power, supporting both revenue growth and margin expansion.
  
• The company's disciplined approach to unit growth-focusing on strategic greenfield development, rigorous site selection, and high-quality M&A-leverages a large addressable market of growing vehicle ownership and suburban expansion, underlining Mister Car Wash's long-term footprint growth potential and scalability of revenue streams.
  
• Ongoing investment in R&D, product innovation (e.g., successful launches like Titanium tier), and operational excellence positions Mister Car Wash to further enhance customer experience and retention; this innovation mindset addresses consumer shifts toward higher-value, differentiated services, which supports elevated revenue and profitability per customer.
  
• Prioritization of advanced water reclamation, environmental solutions, and proactive maintenance bolsters Mister Car Wash's appeal among environmentally conscious consumers and positions the company to benefit from tightening environmental regulations-reducing risk, safeguarding operational continuity, and potentially supporting increased long-term market share and earnings stability.

Mister Car Wash Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mister Car Wash's revenue will grow by 6.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.5% today to 14.3% in 3 years time.
• Analysts expect earnings to reach $176.8 million (and earnings per share of $0.45) by about September 2028, up from $87.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $131.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.4x on those 2028 earnings, down from 20.9x today. This future PE is about the same as the current PE for the US Consumer Services industry at 20.4x.
• Analysts expect the number of shares outstanding to grow by 1.56% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.95%, as per the Simply Wall St company report.

Mister Car Wash Future Earnings Per Share Growth

Risks

• Persistent softness in the retail (non-subscription) segment-with Q2 retail comps down low double digits and management projecting continued negative low double-digit performance in the back half-raises concerns about secular demand softness from discretionary consumers. If this persists, it may pressure revenue and slow overall sales growth.
  
• New unit growth is moderating, with management stating they'll now land at the low end of prior new store openings guidance due to a more disciplined approach and some underperforming or slower-ramping locations, partly due to denser competition and self-cannibalization; market or site saturation and longer ramp times could limit incremental revenue and returns on capital.
  
• Competitive pressures remain elevated, as stores experiencing a competitor opening within three miles saw negative low-single-digit comps versus mid-single digit positive comps for stores without new competition. While management expects recovery, increasing competition or aggressive pricing from rivals could challenge Mister Car Wash's ability to sustain revenue per location and margin.
  
• Rising operating costs-including higher labor rates, utilities (especially electricity), and ongoing necessary repairs and maintenance-are putting upward pressure on operating expenses (up 200 basis points year-over-year), which, if unmitigated, threaten EBITDA and net margins.
  
• The company's model relies heavily on the Unlimited Wash Club (UWC) membership, representing about 75% of sales; this high concentration in one recurring revenue stream creates vulnerability to broader economic downturns, increased price sensitivity, or slowing membership growth, which would deeply impact revenue consistency and earnings stability.

Valuation

• The analysts have a consensus price target of $8.172 for Mister Car Wash based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $176.8 million, and it would be trading on a PE ratio of 20.4x, assuming you use a discount rate of 9.0%.
• Given the current share price of $5.57, the analyst price target of $8.17 is 31.8% 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.