MEC

Mayville Engineering ($MEC) CEO Buys $105K at Lows...Tariff Beneficiary Emerges

08/08/2025 16:09

Jagadeesh Reddy, CEO of Mayville Engineering $MEC, purchased 7,500 shares for $105,450 on August 7th at $14.06 per share. This significant purchase near the recent 52-week low has caught market attention as a strong signal of management's confidence rather than routine buying. Mayville Engineering, founded in 1945, is a leading U.S.-based metal fabricator operating 27 facilities across nine states with approximately 2,200 employees. The company provides integrated manufacturing services from design to assembly for diverse OEM customers in commercial vehicles, construction equipment, powersports, agriculture, and military equipment. Notably, 95% of its supply chain is domestically sourced, which has become a crucial competitive advantage in the current environment. With President Trump's imposition of sweeping tariffs ranging from 10-40% on major trading partners including Canada, Taiwan, and India on August 1st, new opportunities are emerging for U.S. manufacturers. Companies like Mayville Engineering with robust domestic supply chains could gain pricing advantages over foreign competitors. Market interest in "reshoring" beneficiaries has indeed heightened since the tariff announcement, with $MEC positioned at the center of this trend. However, current realities remain challenging. Q2 2025 revenue declined 19.1% year-over-year to $132.33 million, and the company posted a 5-cent per share loss versus the expected 5-cent profit. Major business segments all showed double-digit declines: commercial vehicles (-20.9%), construction & access (-25.9%), powersports (-35.2%), and agriculture (-36.9%). Four consecutive quarters of earnings misses have driven the stock down approximately 24% over the past year. Yet insider buying continues persistently. CEO Reddy also purchased $98,698 worth of shares in November 2024 when the stock was at $16.72, and made additional purchases in March. CFO Todd Butz, SVP Sean Leuba, and CHRO Rachele Marie Lehr all participated in concentrated buying in November 2024. This pattern suggests deep insider conviction about business fundamentals rather than mere optimistic expectations. The company's cash position of only $206,000 is concerning, but $185 million in credit facilities and strong cash flows—$79.21 million in operating cash flow and $47.9 million in levered free cash flow annually—mitigate liquidity risks. The company successfully repaid $8.7 million in debt and repurchased $2.9 million in shares during Q2. Analysts maintain an average 'buy' rating with a 12-month price target of $21, representing 45% upside potential from current levels. They project 2026 earnings per share to surge 158% from $0.31 to $0.80, reflecting anticipated benefits from EPA emissions regulations driving commercial vehicle pre-buying and growing data center infrastructure demand. The July acquisition of Accu-Fab could mark an important turning point. Entry into data center and power infrastructure markets reduces cyclical sensitivity of existing businesses while securing stable revenue streams. Integration synergies are expected to accelerate earnings improvement from year-end. Key indicators for investors include positive signals such as increased commercial vehicle orders, Accu-Fab integration synergies, continued military segment growth (+26.8%), and quarterly adjusted EBITDA margin improvements. Conversely, warning signs include further cash depletion, major customer order cancellations, and retreat from tariff policies. In an optimistic scenario, tariff benefits combined with Accu-Fab synergies could drive meaningful earnings recovery starting in 2026. The base case envisions gradual improvement from late 2025, establishing a stable growth trajectory by mid-2026. However, prolonged economic weakness and reduced tariff policies could delay recovery until 2027. Considering the CEO's bottom-fishing purchase, structural advantages from 95% domestic sourcing, and undervalued metrics, $MEC presents a compelling investment opportunity worth consideration at current levels.