MCW - Mister Car Wash Shines In Profitability While Shares Appear Fairly Valued

2024-04-20 04:43:13 ET

Summary

• Mister Car Wash is the largest publicly traded machine car wash operator in the U.S. with over 475 locations nationwide.
• The company has shown solid fiscal improvements in 2023, suggesting a 15% undervaluation in shares given a base-case outlook for FY24.
• However, the current share price already factors in significant levels of growth, leaving shares slightly overvalued in a bear-case scenario.
• MCW also faces risk from a cyclical demand environment and a relatively large debt burden.
• Hold rating issued.

Investment Thesis

Mister Car Wash ( MCW ) is the largest publicly traded machine car wash operator in the U.S. Since the early 2000s, the firm has grown rapidly to become a nationwide chain of wash centres.

Since their IPO, profitability has failed to match lofty valuations. However, solid fiscal improvements in 2023 have coincided with a much fairer share price which, given a base-case outlook for 2024, may suggest a 15% undervaluation in shares.

Nevertheless, significant levels of growth are already baked-in to the current share price with any underperformance from a baseline 8% EPS growth estimate leaving shares slightly overvalued in a bear-case scenario.

I therefore rate MCW a Hold at present time.

Business Profile

Mister Car Wash is the largest automated car wash operator in the United States. With over 475 locations, MCW serves around 300 million customers per year across 21 states. The "Mister" brand is focused on offering customers a wide range of machine car washing and interior cleaning services so as to target a very broad set of potential client demographics....

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