TAYD

Taylor Devices is a genuinely high-quality micro-cap: FY2025 gross margin of 46.4%, operating margin 20.8% and net margin 20.3% on $46.3M of revenue, with a 15.2% ROE. The balance sheet is a fortress — $0 long-term debt, $62.0M equity against $71.6M assets, and $56.3M current assets over just $9.57M current liabilities (a 5.9x current ratio). Net income of $9.41M and EPS of $2.87 (+11.2%, flattered by tiny buybacks) show a business that converts its seismic/defense-damper niche into real profit. The 10-K's CMMC Level 2 / NIST 800-171 cybersecurity posture signals meaningful defense-adjacent work, which underpins durability.

The problem is the trajectory, not the quality. Revenue growth has decelerated hard — from +37% (FY22) and +30% (FY23) to +11% (FY24) and just +3.8% this year — and operating income barely moved (+1.6%). The MD&A itself flags lumpiness: 'variations in timing and amount of customer orders' and 'changing product demand,' and this year's cash flow confirms strain. Operating cash flow fell 43.5% to $7.47M while capex more than doubled (+126% to $2.60M), draining cash to a thin $1.19M (-57.9%). The critical-accounting disclosure adds a specific worry: the receivables allowance ballooned to $564K from $29K on a $751K overdue structural-project balance still in dispute.