MEC

Mayville Engineering ($MEC) President Buys $105K More Shares Amid Decline... 'Bottom Signal' Interpretation Gains Attention

08/12/2025 06:51

Mayville Engineering ($MEC) management's consecutive stock purchases amid the steep share price decline are drawing market attention. Particularly noteworthy is President Jagadeesh Reddy's purchase of 7,500 shares for $105,450 on August 7, which signals strong confidence in the current price level. Mayville Engineering, established in 1945, is America's largest metal fabrication company, providing metal fabrication, aluminum extrusion, coating, and assembly services to OEMs in commercial vehicles, construction equipment, powersports, agriculture, and military sectors. The company achieves 95% of revenue domestically and sources 92% domestically, making it a pure American manufacturer. With approximately 2,200 employees, it has been recognized as America's largest fabricator for 15 consecutive years, securing a solid industry position. The timing of management purchases is particularly significant. When shares plunged from the $21 range to $17 in November 2024, President Reddy invested a total of $197,396 by purchasing 5,903 shares twice on November 7. CFO Todd Butz, CHRO Rachele Lehr, and SVP Sean Leuba also made purchases on the same day. Continuous purchases followed in March and August 2025. The signal investors should note is that management has been consistently investing personal funds during share price declines. However, current financial performance remains challenging. Q2 2025 revenue fell 19.1% year-over-year to $132.33 million, missing analyst expectations of $137.98 million. The primary causes were customer inventory adjustments and demand weakness in commercial vehicles (-13.7%), powersports (-26.5%), construction equipment (-31.4%), and agriculture (-26.9%). The company revised its 2025 revenue guidance downward to $560-590 million. Nevertheless, Mayville Engineering's fundamentals contain positive elements. Trailing twelve-month operating cash flow of $79.21 million significantly exceeds net income of $17.87 million, demonstrating strong cash generation capability. The debt-to-equity ratio of 41.57% remains manageable, and the net leverage ratio is expected to improve from 1.4x to below 1x by year-end. The U.S. manufacturing reshoring trend particularly favors Mayville Engineering. Under the Trump administration's tariff policies and supply chain diversification movements, the company's supply chain structure with 92% domestic sourcing can serve as a competitive advantage. The company is actively pursuing new business opportunities in growth markets like data centers and electrical infrastructure, securing $35-40 million in new contracts by April 2025. Valuation metrics also appear attractive. Current P/E of 16.09x, P/B of 1.13x, and EV/EBITDA of 5.52x are below industry averages. Analysts' average price target of $18 suggests approximately 32% upside potential from the current price of $13.68. Short-term recovery catalysts include completion of customer inventory adjustments and increased commercial vehicle replacement demand due to 2026 EPA emission regulations. Operationally, the company continues focusing on cost reduction and operational efficiency improvements through its MBX framework, enhancing margin recovery prospects. Risk factors include potential delays in customer demand recovery and negative impacts on manufacturing sectors if recession fears materialize. Additionally, cash holdings of only $206,000 may present liquidity constraints. Nonetheless, management's continuous stock purchases strongly suggest insiders view current share price levels as undervalued. Particularly, the president's recent large-scale purchase exceeding $100,000 could be interpreted as a bottom signal. Investors should monitor the Q3 earnings scheduled for November 4 for signs of inventory adjustment completion and performance recovery.