Transcat stock initiated with Buy rating by Lake Street Capital

Investing.com - Lake Street Capital Markets initiated coverage on Transcat Inc. (NASDAQ:TRNS) with a Buy rating and a price target of $105.00 on Thursday. Currently trading at $86.51, the company maintains a "GOOD" overall financial health score according to InvestingPro analysis.

The research firm views Transcat as an attractive way to gain exposure to the calibration and test & measurement market through its two complementary segments: Service and Distribution. The Service segment, which provides accredited calibration and related services, is identified as the primary growth driver due to its recurring revenue nature in regulated industries like life science and aerospace/defense.

Lake Street Capital notes that Transcat stock has retreated approximately 19% year-to-date, compared to the Russell 2000’s 1% gain, attributing this to short-term disruption and volatility within the company’s customer base. The firm believes the June quarter likely represents the bottom for Transcat. Despite recent headwinds, the company has maintained revenue growth of 7.3% over the last twelve months. For deeper insights into Transcat’s valuation and growth metrics, investors can access the comprehensive Pro Research Report available on InvestingPro.

The research firm highlights that investors may be overlooking the Service segment’s high-single-digit growth profile with improving margins. Additionally, the company’s higher-margin rental business and strong track record of acquisitions are cited as potential catalysts.

Lake Street Capital expects Transcat to benefit from sustained long-term growth with continued margin improvement, supporting its $105 price target despite recent headwinds.

In other recent news, Transcat Inc. reported its fiscal Q4 2025 earnings, surpassing analyst expectations with an EPS of $0.68 compared to the forecasted $0.65. The company’s revenue also exceeded projections, coming in at $77.13 million against a forecast of $76.67 million. This positive performance led to a surge in investor confidence, as reflected by the stock’s 18.08% increase following the announcement. Additionally, Transcat’s consolidated revenue for fiscal 2025 grew by 7% to $278.4 million, with service revenue and distribution revenue increasing by 7% and 8%, respectively.

Analysts have shown mixed reactions to Transcat’s recent developments. Craig-Hallum raised its price target for the company from $94.00 to $105.00, maintaining a Buy rating, due to strong margins and overall profitability in the service segment. H.C. Wainwright also increased its price target to $116, citing Transcat’s return to normalized organic growth and its strategic acquisitions, including the purchase of Martin Calibration. Northland, however, maintained a Market Perform rating with an $85.00 price target, noting that Transcat shares are currently trading at fair value.

Transcat’s strategic acquisition of Martin Calibration for $25 million has been highlighted as a significant move, contributing to the company’s service segment growth. Despite macroeconomic uncertainties, analysts like Scott Buck from H.C. Wainwright believe Transcat is well-positioned to handle potential disruptions due to its work in highly regulated industries. The company’s focus on automation and service integration is also expected to drive future growth, as noted in the earnings call.

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