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Why Mayville Engineering Stock Is Soaring Higher Today

By Lou Whiteman – Sep 13, 2021 at 11:36AM

Key Points

  • Mayville has struggled due to trade wars and COVID, but as manufacturers look to move supply chains closer to home, the company could benefit.
  • There are still risks, including labor shortages and the potential for inflation.

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The company could be a beneficiary of insourcing trends.

What happened

Shares of Mayville Engineering (MEC 4.09%) climbed 20% higher on Monday morning after the small manufacturing company got a positive write-up in Barron's over the weekend. Mayville isn't on a lot of radar screens right now, but that could soon change as companies rethink their supply chains.

So what

Mayville is a somewhat sleepy Wisconsin-based maker of a range of prototyping and tooling components, but at least one financial publication thinks that the company could see more business in the years to come.

Worker stands at a tooling plant.

Image source: Getty Images.

Nicholas Jasinski of Barron's wrote that as U.S. manufacturers incorporate the lessons they learned from the pandemic, they'll find the ability to source components reliably is just as important as cost, if not more so. That should give Mayville a leg up against foreign competitors. If nothing else, companies appear to be prioritizing having multiple suppliers.

That would be a nice reversal for Mayville, which has been caught up in the U.S.-China trade war. Even with Monday's gains, the stock is still trailing the S&P 500 by nearly 50 percentage points over the past five years.

Now what

Investors monitoring the company's second-quarter earnings report last month heard a similar optimistic outlook directly from Mayville, but there was reason for caution as well. CEO Bob Kamphuis said he sees "strong demand trends across almost all of the end markets we focus on," but warned that "finding quality employees, inflationary pressures, and supply chain constraint factors continue to be challenges in 2021."

Things seem to be going Mayville's way, but investors should be cautious about jumping into this rally. These so-called Barron's bumps tend to be short-lived, and it is unlikely Mayville will be able to go straight up from here.

This is a good company with some positive tailwinds, but investors should be in no rush to jump in on a day when the stock is up big.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Mayville Engineering Company, Inc. Stock Quote
Mayville Engineering Company, Inc.
$13.23 (4.09%) $0.52

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