Why Mistras Group's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of energy and industrial service provider Mistras Group (NYSE: MG  ) fell 17% today after the company lowered guidance.

So what: Management is expecting full-year revenue to be $529 million, in line with previous expectations. But adjusted EBITDA is now expected to be $68 million, lower than guidance of $75 million to $80 million and lower than analysts' $72.4 million estimate.  

Now what: The big problem today is that margins are down on higher-than-expected acquisition costs, and results aren't expected to pick up significantly next year. For fiscal 2014, management is expecting $74 million to $80 million in adjusted EBITDA, only in line with this year's old estimate. I think the stock is simply too expensive given the disappointing margins, and if investors can't expect more growth than what management has guided for next year, the stock isn't worth buying today.

Interested in more info on Mistras Group? Add it to your watchlist by clicking here.


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