XPEL

XPEL remains a genuinely good business. Revenue has compounded from $259M (FY2021) to $476M (FY2025), up 13.3% in the latest year, and the balance sheet is pristine: liabilities/equity of just 0.35x, long-term debt that was already a rounding error ($458K back in FY2021), cash up 130% to $50.9M, and operating cash flow of $66.9M (+40%) against a trivial $4.0M capex. ROE of 18.3% and a 42.2% gross margin that held flat year-over-year point to durable unit economics and pricing power in protective films. Window film (+21.7% to $94.5M) is the bright spot, offsetting a maturing paint-protection-film line that grew only 10.0% after actually shrinking 1.4% in 2024 — PPF is still 52% of revenue, so its deceleration matters.

The blemish is margin, not growth. Operating income rose just 5.9% to $62.6M and the operating margin slipped to 13.2% from 14.1% (FY2024) and 16.9% (FY2023). The MD&A makes the cause explicit: total operating expenses jumped 17.1%, far outpacing the 13.3% revenue gain and climbing to 29.1% of revenue from 24.1% two years ago. Strikingly, operating income is still below its FY2023 peak of $67.0M even though revenue is ~20% higher — the company is buying growth with deteriorating operating leverage. EBITDA margin tells the same story, down to 16.3% from 19.4% in FY2023.