EPS of $0.64 decreased by 26.4% from previous year
Gross margin of 42.9%
Net income of 2.00M
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Taylor Devices Inc (TAYD) QQ3 2025 Earnings Analysis: Resilient Margins and Strong Free Cash Flow Amid Revenue Decline in Industrial Machinery
Executive Summary
Taylor Devices Inc reported Q3 2025 results with revenue of $10.56 million, down 13.8% year over year but up 172% quarter over quarter from Q2, signaling a sharp quarterly rebound amidst a softer year-over-year demand base. The quarter exhibited solid profitability with gross margin of 42.9% and operating margin of 19.1%, producing net income of $2.00 million and earnings per share (EPS) of $0.64. Cash generation remained robust, as operating cash flow reached $9.02 million and free cash flow was $8.84 million, underpinning a net cash position of approximately $2.30 million and substantial liquid investments. The balance sheet remains strong, with total assets of $70.15 million, total stockholders’ equity of $57.80 million, and a healthy liquidity profile (current ratio 4.57, quick ratio 3.86). However, the company continues to show a stretched working capital cycle, evidenced by a sizable change in working capital of about $6.50 million, and relatively slow inventory turnover (0.686x) with long days sales outstanding (84.7 days) and inventory days (131.3 days).
From a strategic lens, management’s commentary is not captured in the provided transcript for QQ3 2025, limiting explicit guidance. Nonetheless, the earnings base demonstrates meaningful operating profitability and liquidity, paired with disciplined capital allocation (minor stock issuance and modest buybacks; significant investment purchases). The valuation backdrop shows a modest P/E around 13x and a P/B near 1.80x, suggesting a balance of leverage to profitability and downside protection from strong cash flow generation for a small-cap industrial supplier.
Key Performance Indicators
Revenue
10.56M
QoQ: 171.86% | YoY:-13.79%
Gross Profit
4.53M
42.87% margin
QoQ: 16.54% | YoY:-21.28%
Operating Income
2.02M
QoQ: 113.90% | YoY:-32.53%
Net Income
2.00M
QoQ: 89.58% | YoY:-25.76%
EPS
0.64
QoQ: 88.24% | YoY:-26.44%
Revenue Trend
Margin Analysis
Key Insights
Total Assets: $70.15m
Total Current Assets: $56.39m; Total Current Liabilities: $12.34m
Current Ratio: 4.57; Quick Ratio: 3.86; Cash Ratio: 0.19
Financial Highlights
Revenue: $10.5649m; YoY Change: -13.8%; QoQ Change: +171.86%
Gross Profit: $4.5289m; Gross Margin: 42.87%; YoY Gross Profit: -21.28%; QoQ: +16.54%
Operating Income: $2.0196m; Operating Margin: 19.12%; YoY: -32.53%; QoQ: +113.90%
Net Income: $2.0022m; Net Margin: 18.95%; YoY: -25.76%; QoQ: +89.58%
EPS (Diluted): $0.64; YoY: -26.44%; QoQ: +88.24%
EBITDA: $2.5784m; EBITDARatio: 24.40%
Cash Flow from Operations: $9.0229m; Free Cash Flow: $8.8355m
Cash and Short-Term Investments: $35.4374m (Cash End: $2.3017m; Beginning: $2.3553m)
Net Change in Cash: -$0.0536m; Net Debt: -$2.3017m (net cash)
Balance Sheet:
- Total Assets: $70.15m
- Total Current Assets: $56.39m; Total Current Liabilities: $12.34m
- Total Stockholders’ Equity: $57.80m
- Cash & Equivalents: $2.30m; Short-Term Investments: $33.14m; Total Investments: $33.14m
Liquidity & Activity:
- Current Ratio: 4.57; Quick Ratio: 3.86; Cash Ratio: 0.19
- DSO: 84.7 days; DIO: 131.3 days; CCC: 216.0 days
- Receivables Turnover: 1.06x; Inventory Turnover: 0.69x; Payables Turnover: 5.41x
- Asset Turnover: 0.151; Fixed Asset Turnover: 0.965
Valuation (as indicated in the peer context): P/E ~13.0x; P/B ~1.80x; P/S ~9.87x; Enterprise Value Multiple ~39.6x; Price to Free Cash Flows ~11.8x; Price to Operating Cash Flows ~11.6x
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
10.56M
-13.79%
171.86%
Gross Profit
4.53M
-21.28%
16.54%
Operating Income
2.02M
-32.53%
113.90%
Net Income
2.00M
-25.76%
89.58%
EPS
0.64
-26.44%
88.24%
Key Financial Ratios
currentRatio
4.57
grossProfitMargin
42.9%
operatingProfitMargin
19.1%
netProfitMargin
19%
returnOnAssets
2.85%
returnOnEquity
3.46%
operatingCashFlowPerShare
$2.9
freeCashFlowPerShare
$2.84
priceToBookRatio
1.8
priceEarningsRatio
13.02
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript not provided in the supplied data for QQ3 2025. No management quotes or session content are available to extract themes on strategy, operations, or market conditions. The analysis of qualitative factors is therefore constrained to the numeric results and known filing details. Recommend sourcing the QQ3 2025 earnings call transcript or the management presentation to enrich the qualitative section with explicit guidance and strategic commentary.
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Forward Guidance
No explicit forward guidance was disclosed in the QQ3 2025 filing. In the absence of formal guidance, investors should monitor: (1) order backlog and new orders for defense/aerospace and industrial machinery segments, (2) working capital progression given the extended receivables and inventory cycle, (3) capex plans or product line extensions that could lift high-margin exposure, and (4) macro indicators tied to defense spending and industrial production where Taylor Devices operates. If demand stabilizes and the company sustains its current margin profile, FCF generation supports optionality for capital returns or debt management. Real-time guidance, backlog visibility, and management commentary in subsequent filings or presentations will be key to refining the outlook.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TAYD Focus
42.87%
19.10%
3.46%
13.02%
SXI
39.70%
12.60%
3.19%
22.10%
THR
46.20%
20.60%
3.79%
13.08%
NPO
42.30%
13.10%
1.36%
43.00%
GHM
24.80%
4.70%
1.39%
76.24%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Taylor Devices demonstrates a resilient profitability profile and strong cash generation in QQ3 2025, underpinned by a net cash position and substantial liquid investments. The revenue decline versus the prior-year period underscores cyclicality within a specialized industrial machinery niche, but the QoQ surge signals a rebound in demand or order fulfillment cadence. The stock trades at a modest multiple (P/E near 13x) with a solid balance sheet, suggesting limited downside risk relative to peers while offering upside from continued FCF strength and potential backlog realization. The key to an affirmative stance is visibility into backlog, order intake, and any management guidance in upcoming quarters, which would clarify the durability of the current margin framework and the trajectory of the working capital cycle. Investors should monitor defense/aerospace cycle sensitivity, international demand opportunities, and capital allocation decisions (retaining liquidity, buybacks, or selective investments) as primary drivers of the next leg of value creation.
Key Investment Factors
Growth Potential
Growth potential anchored by a stable high-margin product mix (shocks, dampers, industrial buffers) and potential aerospace/defense pipeline expansion. The strong FCF as a % of revenue supports potential investments in capacity, R&D, or selective acquisitions if compelling opportunities arise.
Profitability Risk
Revenue cyclicality in machinery and aerospace end-markets; longer working-capital cycle (high DIO) and inventory needs; potential customer concentration in defense/aerospace; exposure to supplier disruptions; valuation sensitivity to defense budgets and capex cycles.
Financial Position
Strong liquidity with net cash position (~$2.30m) and substantial liquid investments (~$33m in short-term investments). Consistent free cash flow generation ($8.84m in the quarter) and a solid equity base (stockholders’ equity ~$57.8m) provide resilience and optionality for capital allocation.
SWOT Analysis
Strengths
Consistently strong gross margin (~42-43%) and robust operating margin (~19%) in QQ3 2025.
Solid net income and EPS (EPS $0.64) amid revenue volatility.
Significant free cash flow generation ($8.84m) and a net cash position (~$2.30m).