Sport boat manufacturer MasterCraft (NASDAQ: MCFT) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, but sales fell by 20.6% year on year to $75.96 million. On the other hand, the company’s full-year revenue guidance of $275 million at the midpoint came in 3.7% below analysts’ estimates. Its non-GAAP profit of $0.30 per share was 70.5% above analysts’ consensus estimates.

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Brad Nelson, Chief Executive Officer, commented, “Our business performed well during the third quarter against a backdrop of macroeconomic and demand uncertainty. Our near-term focus continues to be centered around closely managing production levels, driving focused innovation, and delivering operating efficiencies – all while maximizing cash flow and aggressively managing costs.”

Company Overview

Started by a waterskiing instructor, MasterCraft (NASDAQ: MCFT) specializes in designing, manufacturing, and selling sport boats.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. MasterCraft struggled to consistently generate demand over the last five years as its sales dropped at a 9% annual rate. This was below our standards and is a sign of lacking business quality.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. MasterCraft’s recent performance shows its demand remained suppressed as its revenue has declined by 37.4% annually over the last two years.

MasterCraft also discloses its number of boats sold, which reached 619 in the latest quarter. Over the last two years, MasterCraft’s boats sold averaged 40.8% year-on-year declines. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen.

This quarter, MasterCraft’s revenue fell by 20.6% year on year to $75.96 million but beat Wall Street’s estimates by 1.4%.

Looking ahead, sell-side analysts expect revenue to grow 18.6% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and indicates its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

MasterCraft’s operating margin has shrunk over the last 12 months and averaged 5.9% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

This quarter, MasterCraft generated an operating profit margin of 5.4%, up 1.2 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for MasterCraft, its EPS declined by 26.7% annually over the last five years, more than its revenue. We can see the difference stemmed from higher taxes as the company actually grew its operating margin and repurchased its shares during this time.

In Q1, MasterCraft reported EPS at $0.30, down from $0.37 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects MasterCraft’s full-year EPS of $0.48 to grow 162%.

Key Takeaways from MasterCraft’s Q1 Results

We were impressed by how significantly MasterCraft blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. On the other hand, its number of boats sold missed and it lowered its full-year revenue, EPS, and EBITDA guidance. Overall, this was a weaker quarter. The stock traded down 4.2% to $15.11 immediately after reporting.

So do we think MasterCraft is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.