Cautious Outlook on Mesa Laboratories: Sell Rating Amid Margin Decline and Valuation Concerns

Brandon Couillard, an analyst from Wells Fargo, maintained the Sell rating on Mesa Laboratories (MLAB – Research Report). The associated price target is $100.00.

Brandon Couillard has given his Sell rating due to a combination of factors impacting Mesa Laboratories. Despite the company showing a solid core growth of 5.5% in the fourth quarter, the adjusted EBITDA fell short by approximately $2 million, largely due to higher-than-expected bonus accruals. This one-time expense significantly affected the company’s margins, which declined by about 400 basis points quarter-over-quarter and 600 basis points year-over-year.
Additionally, while Mesa Laboratories has managed to maintain a stable financial position with a free cash flow of $47 million and a reduction in net leverage, the valuation remains a concern. The company’s valuation at approximately 12 times EBITDA is not particularly compelling compared to other stocks in the Tools sector. Couillard’s price target adjustment from $120 to $100 reflects these challenges, suggesting a cautious outlook on the stock’s future performance.

MLAB’s price has also changed moderately for the past six months – from $117.140 to $104.635, which is a -10.68% drop .