EVI

EVI is a value-added distributor of commercial laundry equipment executing a disciplined buy-and-build roll-up, and the machine works on the top line: revenue has climbed from $242M (FY2021) to $390M (FY2025, +10.3% YoY), gross profit rose 12.4% to $118M, and the FY2025 audit from BDO carried an unqualified opinion on both statements and internal controls — a clean, real business. Management is explicit that FY2025's growth came from four acquisitions (Laundry Pro, O'Dell, Haiges, Girbau North America; $51M total consideration) plus price increases 'aimed at maintaining or increasing margins,' and a fifth deal (ASN Laundry Group) closed August 2025. Net income jumped 33% to $7.50M and diluted EPS 32.4% to $0.49.

The problem is that the earnings power behind that headline is thin and the valuation is not. This is a structurally low-margin distributor: gross margin 30.4%, operating margin just 3.5%, net margin 1.9%, and ROE only 5.2%. Zoom out past the FY2025 bounce and net income is essentially flat-to-lumpy over five years — $8.38M (FY21), $4.09M (FY22), $9.72M (FY23), $5.65M (FY24), $7.50M (FY25) — so revenue up ~60% since FY2021 has produced no durable step-up in profit. At $16.09 the stock trades at 32.8x FY diluted EPS, a rich multiple for a business earning a 5.2% return on equity; P/S of 0.5x looks cheap only because thin-margin distribution always screens that way.