MPAA

MPAA has genuinely turned the corner operationally. After three straight loss years (FY2024 -$49.2M, FY2025 -$19.5M), FY2026 swung to $12.4M net income on revenue of $790M (+4.3%), with operating income up 64.9% to $65.8M and operating margin recovering to 8.3%. Revenue has grown every year from $650M in FY2022 to $790M in FY2026, and management is retiring stock ($11.4M of buybacks, shares down 2.6% to 18.9M). At 0.4x sales and a market cap of just $278M, the equity is not expensively priced against the top line, and the 23.7x P/E overstates the multiple because EPS is still depressed early in the recovery.

The problem is the capital structure. The MD&A shows $94.7M drawn on the PNC revolver at 6.79% plus $15.5M in letters of credit, and a $32M related-party convertible with Bison Capital accruing 10% interest paid in kind (already grown by ~$3.5M of PIK in FY2026). That interest load is why an 8.3% operating margin collapses to a 1.6% net margin and a weak 4.7% ROE. Liabilities are 2.83x equity, cash is a thin $14.7M, and operating cash flow fell 57.9% to $19.2M as working capital built — so the balance sheet has little margin for error if the parts cycle softens.