Breaking Down Twin Disc, Incorporated (TWIN) Financial Health: Key Insights for Investors

You're looking at Twin Disc, Incorporated (TWIN) and seeing a mixed signal: strong top-line growth but persistent bottom-line pressure, and honestly, that's the story for fiscal year 2025. The company delivered a solid 15.5% increase in full-year sales, hitting $340.7 million, largely fueled by acquisitions and robust defense-driven demand in their Marine and Propulsion Systems segment, which grew 17.1%. But here's the quick math: despite that revenue jump, the company posted a net loss of ($1.9) million for the year, and their core organic growth-what they did without buying other companies-was a slim 1.0%. Still, the near-term outlook has a bright spot, with the six-month backlog climbing to $163.3 million as of the first quarter of fiscal 2026, so you need to understand where that growth is coming from and what the increasing total debt of $43.7 million means for their balance sheet and future capital spending.

Revenue Analysis

You're looking at Twin Disc, Incorporated (TWIN) and seeing a headline revenue jump, but you need to know what's really driving the engine. The direct takeaway is that while the top-line revenue growth looks strong, the underlying organic growth is quite soft, meaning recent acquisitions are doing the heavy lifting.

For the fiscal year 2025, Twin Disc, Incorporated delivered total revenue of $340.7 million, marking a significant year-over-year increase of 15.5%. Here's the quick math: almost all that expansion came from the addition of companies like Katsa and Kobelt, which expanded the product portfolio and global reach. To be fair, the organic growth rate-what the core business did without those acquisitions-was only 1.0% for the full year. That's a huge difference you defintely need to factor into your valuation.

Breakdown of Primary Revenue Sources

Twin Disc, Incorporated's revenue streams are primarily rooted in its power transmission technology for three key segments. The Manufacturing segment is the primary driver, contributing approximately 85% of the total trailing twelve-month revenue, or about $288.3 million. The strength is clearly visible in the Marine and Propulsion Systems segment, which saw full-year growth of 17.1%.

Based on the final quarter of fiscal 2025, the segments contributed as follows:

• Marine & Propulsion Systems: $53.0 million (up 12.2% YoY)
• Land-Based Transmissions: $26.1 million (up 4.5% YoY)
• Industrial Segment: $13.1 million (up a massive 82% YoY)

The Industrial segment's jump is a clear sign that diversification efforts are starting to pay off, plus the full-year growth for that segment was an impressive 61.7%.

Key Shifts and Near-Term Risks

The biggest change in the revenue mix is the increased reliance on acquisitions and a growing defense market. The company's six-month backlog, which stood at a healthy $150.5 million at the end of FY2025, is increasingly supported by defense-related orders, which grew about 45% year-over-year and now comprise roughly 15% of that backlog. This defense tailwind is a clear opportunity.

Still, you have to note the risks. The oil and gas market remains a drag, contributing only about 8% of the total FY2025 revenue, and organic sales in the fourth quarter were down 8.4% year-over-year, largely due to reduced shipments into China. Also, the geographical mix is shifting, with a greater proportion of sales now coming from Europe, which is a direct result of the acquisitions, and a lower proportion from the Asia-Pacific region. You can find more on the company's long-term vision here: Mission Statement, Vision, & Core Values of Twin Disc, Incorporated (TWIN).

Profitability Metrics

You're looking for a clear picture of how Twin Disc, Incorporated (TWIN) is actually turning its revenue into profit, especially after a year of acquisitions. The direct takeaway for fiscal year 2025 (FY2025) is this: while sales grew significantly, margins faced pressure, resulting in a full-year net loss. The company's profitability is defintely below its specialty industrial machinery peers right now.

Twin Disc, Incorporated reported total sales of $340.7 million for FY2025, a strong increase of 15.5% year-over-year. But the real story is in the margins-the percentages that tell you how much of that sales dollar is left after costs. For the full year, the company's gross profit was $92.7 million, translating to a gross margin of 27.2%. This is a key metric, and honestly, it's a drop of 100 basis points (1.0%) from the prior fiscal year.

• Gross Margin: 27.2% (Profit before operating expenses).
• Operating Margin: 3.02% (Profit before interest and taxes).
• Net Profit Margin: (0.56%) (Profit after all expenses and taxes).

Margin Trends and Operational Efficiency

The dip in the gross margin to 27.2% signals a struggle with the cost of goods sold (COGS), likely due to ongoing inflationary pressures and the integration of new acquisitions like Katsa and Kobelt. To be fair, a gross margin in the 25%-35% range is typical for the broader Manufacturing sector, so the company is still within that ballpark. The real strain shows when you look at operating and net profits.

Here's the quick math on operating expenses: Marketing, Engineering, and Administrative (ME&A) expenses jumped 15.1% to $82.4 million for FY2025. This increase, driven by the new acquisitions and higher professional fees, squeezed the operating profit (EBIT) down to just $10.3 million, giving an Operating Margin of only 3.02%. That's a very thin cushion.

The bottom line confirms the pressure: Twin Disc, Incorporated recorded a net loss of ($1.9 million) for the full fiscal year 2025. This translates to a Net Profit Margin of (0.56%). This shift from net income in the prior year to a net loss in FY2025 is the clearest sign of integration and cost challenges outweighing revenue growth.

Industry Comparison: The Profitability Gap

When you stack Twin Disc, Incorporated against its peers in the Specialty Industrial Machinery sector, the profitability gap becomes a clear action point. The industry average margins for November 2025 show a much healthier financial profile for the typical competitor.

You need to see TWIN's margins move closer to these industry averages to justify a long-term investment, or at least see a clear path to get there. The current margins suggest the company lacks the pricing power or cost control efficiency of its peers.

The immediate opportunity is for management to execute on the integration of its recent acquisitions to drive cost synergies-meaning making the combined companies work more efficiently-and to leverage its strong backlog of $150.5 million to improve margins. If you want to dig deeper into who is betting on this turnaround, you should check out Exploring Twin Disc, Incorporated (TWIN) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You want to know if Twin Disc, Incorporated (TWIN) is financing its growth responsibly, and the short answer is yes, but the debt level is rising fast due to recent acquisitions. The company's capital structure remains conservative, leaning heavily on equity, but its total debt jumped significantly in the first quarter of fiscal year 2026.

As of September 26, 2025, Twin Disc, Incorporated's total debt stood at $43.7 million, a notable increase from the $31.4 million reported at the close of fiscal year 2025 on June 30. Here's the quick math: with total equity at $160.9 million as of the same September 2025 quarter end, the calculated Total Debt-to-Equity ratio is approximately 0.27, or 27%. This is a very healthy number.

That 0.27 ratio is well below the industry benchmark for Industrial Machinery & Supplies, which typically sits around 0.50 in 2025. This low leverage shows management is defintely prioritizing a strong balance sheet, which gives them a lot of financial flexibility. However, the trend is what matters most right now. The debt increase is a direct result of the company's strategic push into new markets via M&A, specifically the acquisitions of Katsa and Kobelt, which drove the debt higher throughout fiscal 2025.

• Total Debt (Sept 2025): $43.7 million
• Total Equity (Sept 2025): $160.9 million
• Debt-to-Equity Ratio: 0.27 (or 27%)
• Industry Average D/E: ~0.50

The company is clearly comfortable using debt financing (leverage) to fund its growth strategy, but they are doing so within a managed framework. Their primary debt is through a Credit Agreement, and they used increased borrowing capacity under this agreement to help finance the Kobelt acquisition. The term for the Revolving Loans runs through April 1, 2027, giving them a clear runway. Debt reduction and dividend maintenance remain top capital allocation priorities, which is exactly what you want to hear from a management team that just took on new debt.

What this estimate hides is the interest rate risk on that revolving debt, but the low overall leverage means they have plenty of cushion. They are balancing debt financing for M&A-driven growth with equity funding-retained earnings, mostly-to keep the core business stable. You can see more details on the operational impact of this strategy in our full post on the company's health: Breaking Down Twin Disc, Incorporated (TWIN) Financial Health: Key Insights for Investors.

Next step: Check the Q2 2026 earnings call for any changes to the April 2027 debt maturity or new credit ratings, as the debt level is now the primary lever for growth.

Liquidity and Solvency

You need to know if Twin Disc, Incorporated (TWIN) can cover its near-term obligations, and the quick answer is yes, but the quality of that liquidity is changing. The company's liquidity position, as of the most recent quarter (Q1 Fiscal Year 2026, ended September 26, 2025), is technically strong on paper, but the underlying cash flow trends show a reliance on inventory and new debt to manage operations.

The Current Ratio, which measures current assets against current liabilities, sits at a healthy 2.08. This means Twin Disc, Incorporated has over two dollars in short-term assets for every dollar of short-term debt. That's defintely a solid buffer. However, the Quick Ratio (or acid-test ratio), which strips out inventory-often the least liquid current asset-is only 0.64. This low number tells you that without selling its inventory, the company cannot cover all its immediate liabilities. It's a classic manufacturing-sector liquidity profile: asset-rich, but cash-tight.

Working capital, which is the difference between current assets and current liabilities, has been trending up, which is a good sign on the balance sheet. It increased to $132.3 million in the first quarter of fiscal 2026, an increase of $11.2 million from the fiscal year 2025 end. Here's the quick math on why that growth isn't all good news:

• The cash balance actually decreased to $14.241 million.
• The working capital increase was primarily driven by higher inventories ($158.272 million) and trade accounts receivable ($63.950 million).
• This means the company is building up product and waiting longer to collect payments.

This inventory build-up is the main near-term risk. If demand slows, that $158.3 million in inventory becomes a major drag on cash flow, not a source of liquidity.

The cash flow statements for the most recent quarter clearly map out the challenge. For the full fiscal year 2025, Twin Disc, Incorporated generated a positive $24.0 million from operating activities. But in Q1 FY2026, Operating Cash Flow was negative ($7.524) million. This negative flow was due to the increased usage of working capital, specifically the build-up in receivables and inventory.

To fund that negative operating cash flow and the Investing Cash Flow of ($3.439) million (mostly capital expenditures), the company relied on its Financing Cash Flow, which was a positive $9.868 million from net borrowings. This is the key action point for you to track: the debt is rising to cover operational needs and capital spending.

The total debt has climbed to $43.719 million in Q1 FY2026, up from $31.446 million at the end of FY2025. While the company remains in compliance with its credit agreements, the trend of funding operations with new debt is not sustainable long-term. The strength is in the balance sheet's current asset cushion; the concern is the operating cash flow's recent dip into the red. You can read more about the company's performance in Breaking Down Twin Disc, Incorporated (TWIN) Financial Health: Key Insights for Investors.

Next Step: Monitor Q2 FY2026 Operating Cash Flow to see if the negative trend reverses, indicating better management of inventory and receivables.

Valuation Analysis

You're looking at Twin Disc, Incorporated (TWIN) and asking the core question: Is this stock overvalued, undervalued, or priced just right? The quick answer is that its valuation metrics send mixed, even contradictory, signals, suggesting the market is pricing in significant future earnings growth, but the current earnings don't quite justify the price yet. You need to look past the headline numbers.

As of November 2025, the stock has traded near the top of its range, closing recently at approximately $14.66 per share. Over the last 12 months, the stock price has climbed by over 25.94%, reflecting a strong recovery and market optimism about its heavy-duty power transmission equipment business.

Here's the quick math on the key valuation multiples:

• Price-to-Earnings (P/E): The trailing 12-month P/E ratio is a massive 779.62. That's a red flag, honestly, because it implies current earnings are extremely low relative to the stock price.
• Forward P/E: This ratio drops sharply to just 12.47. This is the market's bet: analysts expect earnings per share (EPS) to jump significantly, making the stock look cheap on future earnings.
• Price-to-Book (P/B): At about 1.30, the stock is trading slightly above its book value, which is reasonable for an industrial company with tangible assets.
• Enterprise Value-to-EBITDA (EV/EBITDA): This multiple sits at 9.89. This is a more grounded figure, suggesting the company's operating cash flow (EBITDA) is valued fairly in line with its industrial peers.

The vast difference between the trailing and forward P/E is the whole story here. The stock is defintely not cheap on past performance, but it is priced for a major operational turnaround.

Dividend Health and Payout Risk

Twin Disc, Incorporated (TWIN) does pay a dividend, offering an annual payout of $0.16 per share, which translates to a modest dividend yield of about 1.06%. Still, the sustainability of this dividend is a major risk you need to consider.

The dividend payout ratio based on trailing earnings is an unsustainable 800.00%. This means the company is paying out eight times more in dividends than it earned over the last year. What this estimate hides is that the company's earnings have been very thin. Crucially, the payout ratio based on cash flow is a much more manageable 18.22%. This tells me they are using cash on hand, not just earnings, to maintain the dividend-a short-term fix, not a long-term strategy unless earnings recover quickly. You can dig deeper into the shareholder base by Exploring Twin Disc, Incorporated (TWIN) Investor Profile: Who's Buying and Why?

Analyst Consensus and Price Trend

The analyst consensus is mixed, which is exactly what you'd expect from these conflicting metrics. One consensus rates the stock a 'Strong Buy,' while others view it as a 'Hold' or 'Fairly Valued.' The average 52-week price for Twin Disc, Incorporated (TWIN) was around $10.43, but the stock has surged to the mid-$14 to mid-$15 range, with its 52-week high hitting $17.08.

The current price of $14.66 is trading well above the GF Value estimate of $14.41, suggesting it is fairly valued to slightly overvalued at this moment. This isn't a stock you buy for a deep discount; you buy it for the execution of the expected earnings growth that drives that low forward P/E.

Next Step: Focus your research on the company's Q1 2026 earnings transcript (released Nov 5, 2025) to confirm the drivers behind the projected 90.1% annual earnings growth.

Risk Factors

You're looking at Twin Disc, Incorporated (TWIN) and seeing the strong defense tailwinds and strategic acquisitions, but you need to know what could derail that progress. Honestly, the biggest near-term risks are a classic mix of market cyclicality and the financial strain of growth. The company finished fiscal year 2025 with a net loss of about $1.6 million, a sharp reversal from the prior year, so profitability is the immediate focus.

Market and External Risks: Cyclicality and Tariffs

Twin Disc, Incorporated is still heavily exposed to cyclical markets, which is the core external risk. Nearly 60% of its revenue comes from the marine and oil & gas sectors, which can swing hard with economic cycles. Also, while the global footprint is a strength, it creates currency risk, particularly with the U.S. dollar versus the Euro, which can erode profitability.

The trade policy landscape is another real-world headwind. Management has noted that the impact of tariffs is expected to hit the cost of goods sold by approximately 1% to 3% in the near term. That's a direct pressure point on their gross margin, which was 27.2% for the full fiscal year 2025.

Operational and Strategic Risks: Integration and Supply Chain

The company's strategic shift depends on acquisitions like Kobelt, but that introduces a significant integration risk. Integrating new businesses is never seamless; it drives up Marketing, Engineering, and Administrative (ME&A) expenses, which increased by 6.2%, or $1.2 million, in the first quarter of fiscal 2026, largely due to the Kobelt addition and wage inflation. Supply chain stability is also a constant concern, with the potential for raw material shortages, like steel, to disrupt production schedules. You can't ignore the risk of customer concentration either, as the top ten customers account for a significant portion of sales.

Financial Risks: Debt and Profitability

The strategic acquisitions, while driving revenue (full-year fiscal 2025 sales were $340.7 million), have also increased the debt load. Net debt jumped from $15.3 million at the end of fiscal 2025 to $29.5 million in the first quarter of fiscal 2026, primarily due to the Kobelt deal. That's a leverage ratio (net debt to EBITDA) of 0.8x in FY25, which is manageable but needs careful monitoring as they continue to pursue transformational acquisitions.

The full-year net loss in FY25 is the clearest financial risk. Profitability is defintely a work in progress.

• Market Cyclicality: Nearly 60% revenue exposed to marine/oil & gas.
• Acquisition Integration: Increased ME&A expense by $1.2 million in Q1 FY26.
• Tariff Impact: Expected to hit Cost of Goods Sold by 1-3%.
• Net Debt Increase: Jumped to $29.5 million in Q1 FY26.

Mitigation Strategies: Defense and Efficiency

The company isn't just sitting still; they're actively mitigating these risks. The biggest hedge is the defense segment, which provides stable, long-term contracts. The defense backlog increased by a massive 45% year-over-year, now representing about 15% of the total backlog, which stood at $163.3 million in Q1 FY26. This diversification helps offset commercial market swings. Operationally, they are focusing on margin-enhancement initiatives, which led to a 220 basis point expansion in gross margin in the first quarter of fiscal 2026. They are also strategically adjusting production to mitigate tariff impacts and pushing hard into hybrid and electric solutions, which is a key long-term growth opportunity.

For a deeper dive into the financial health of the company, check out the full post: Breaking Down Twin Disc, Incorporated (TWIN) Financial Health: Key Insights for Investors

Growth Opportunities

You want to know where Twin Disc, Incorporated (TWIN) is going, and the answer is clear: the company is aggressively pivoting into higher-margin, specialized markets, driven by strategic acquisitions and a major push into electrification. This shift is already visible in their fiscal year 2025 (FY2025) results, which saw total sales climb to $340.7 million, a 15.5% increase over the prior year, largely fueled by M&A activity.

The core of their future growth isn't just organic; it's about smart, bolt-on acquisitions. In February 2025, they acquired Kobelt Manufacturing Co. Ltd. for $16.5 million, a move expected to be immediately accretive to earnings. That follows the earlier Katsa Oy acquisition, which is already contributing to double-digit revenue growth in Europe and North America. This strategy is designed to hit their long-term target of $500 million in revenue by fiscal 2030.

Here's the quick math on near-term expectations: analysts forecast revenue to grow 8.1% per annum on average over the next two years, significantly outpacing the general Machinery industry's projected growth of 4.9%. The Marine and Propulsion Systems segment, boosted by the Veth product line, is a major driver, with Veth alone expected to reach $100 million in revenue this year (FY2026).

The company's competitive advantages are now centered around three key areas:

• Defense Market Tailwinds: The defense segment is a powerhouse, with defense-related projects seeing a 45% year-over-year increase in the six-month backlog, now representing approximately 15% of the total. They project doubling defense-related shipments in the next year and again by 2027.
• Electrification Focus: Twin Disc is positioning itself as a leading Hybrid/Electric solution provider for niche marine and land-based applications. They've already secured their first order for e-frac (electrified fracking) offerings, a potential future growth area as the Land-Based Transmissions segment stabilizes.
• Intellectual Property: Their commitment to R&D is backed by a substantial patent portfolio, holding 943 total patent documents as of March 31, 2025, which protects their specialized technology.

The company's strategic initiatives are all about execution and efficiency. Capital expenditures for FY2025 were estimated between $12 million and $14 million, prioritizing efficiency gains like automation in manufacturing. Plus, they maintain a flexible global manufacturing strategy, which helps mitigate geopolitical risks and tariff impacts. To be fair, while revenue is up, the full-year net loss of ($1.9 million) in FY2025 shows the cost of integrating these acquisitions and managing margin pressures, but the strategic direction is defintely sound. You can read more about the long-term vision here: Mission Statement, Vision, & Core Values of Twin Disc, Incorporated (TWIN).

This is a company in transition, moving from a legacy industrial player to a specialized power solutions provider. The robust six-month backlog, which stood at $150.5 million at the end of FY2025 and grew to $163.3 million by the end of Q1 FY2026, is the clearest indicator of sustained demand. The table below summarizes the key financial metrics driving this growth story.

Your next step should be to monitor the integration of Kobelt and Katsa and watch for the margin expansion necessary to convert this top-line growth into bottom-line profitability.