Mayville Engineering Company, Inc. (MEC) stock intrinsic value fair value estimate & owner earnings analysis

Mayville Engineering Company (Milwaukee, Wisconsin, founded 1945) is a contract manufacturer that fabricates, welds, coats and assembles metal components and sub-assemblies for large equipment makers. Its customers span heavy and medium-duty trucks, construction and access equipment, powersports, agriculture, military and, since the July 2025 purchase of Accu-Fab, data center and critical power enclosures. The top ten customers were 62.3% of 2025 sales and the largest was 13.6%. Sales were $455 million in 2021, $588 million in 2023 and $546 million in 2025. How we measure earnings. We start from operating cash flow, remove swings in receivables, inventory, payables and accruals, subtract stock compensation as a real cost, and subtract only the part of capital spending needed to keep the plants running. On that basis earnings per diluted share were $0.61 (2019), $0.67 (2020), -$0.03 (2021), -$0.65 (2022), $0.77 (2023), $2.72 (2024) and $0.88 (2025). Years 2021 and 2022 were burdened by capital spending above 8% of sales, and 2024 was helped by unusually strong operating cash flow. We use about $0.70 per share as the normal level, close to the seven-year median of $0.67 and below the 2025 figure of $0.88. Earnings per share fell 68% in 2025 from 2024, and the base case starts below the 2025 level, so it does not assume a rebound. Non-cash charges such as amortization of acquired intangibles ($9.7 million in 2025) are added back because they are sunk acquisition cost; we do not credit growth from acquisitions. What changed in 2025. Accu-Fab cost about $141 million, funded entirely by drawing on the revolving credit facility, which stood at $202.5 million at year-end 2025 with an interest rate near 6%. That adds roughly $8 million a year of interest, of which only half appears in 2025 cash flow. The facility matures in June 2028 and is subject to a leverage covenant; the company reported compliance at year-end and expects compliance through 2026. In the first half of 2026 sales rose 15% to $308 million, but the company reported a net loss of $10.3 million and operating cash flow of negative $1.3 million with $12.3 million of capital spending, so we have not raised the earnings level on the strength of the acquisition. Accu-Fab's own profit contribution is not separately disclosed in the filing, so none is credited. Base case: $9.60 per share. Earnings of about $0.70 per share stay flat for 30 years and then stop. No growth is credited: 2025 sales of $546 million were below the $588 million of 2023, and market expansion, new programs and share gains are not counted. The flat level is supported by 80 years of operation, hundreds of platforms across long-standing OEM customers, and capital spending that has run well below depreciation ($11.6 million versus $31.6 million in 2025). Bear case: $2.70 per share. The extra debt cost from Accu-Fab is not offset by Accu-Fab profit, earnings are near zero for two years while the company works toward the 2028 debt maturity, and then settle at about $0.25 per share for 25 years. The support is the disclosed $202.5 million of borrowings against $17.7 million of revolver availability, the negative first-half 2026 cash flow, and the risk factor that a decline in performance could breach the leverage covenant. The disclosed exposure to data center customers, whose orders can be delayed or cancelled, is included here. Bull case: $19.30 per share. Earnings reach $1.40 per share, a level between the 2025 result of $0.88 and the 2024 result of $2.72, reflecting Accu-Fab profit exceeding its interest cost, and stay there for 30 years. This rests on the company's own recent record rather than on a market recovery. Weak points we tested. Capital spending of $11.6 million is far below depreciation of $31.6 million, so maintenance spending may be understated; we treated the 2021 and 2022 heavy-spending years as part of the record, which pulls the median down. Tooling-in-progress changes (under $3 million in each of 2023 to 2025) were not separated from working capital. Reported figures reconciled to the cash flow statement within 1% for 2025. What would make this wrong: a second half of 2026 in which Accu-Fab lifts cash flow above the interest cost would move value toward the bull case; a covenant problem or refinancing on worse terms before June 2028 would move it toward the bear case.