MGPI

We rate MGP INGREDIENTS INC (MGPI) as a Reduce with a composite score of 42.7/100 at a current price of $25.82. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in value (67th percentile) and stability (66th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (27th percentile) and quality (28th percentile) tempers our overall conviction. We assign a No Moat rating (34/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

MGP INGREDIENTS INC holds a top-quartile position (#0 of 50) within the Wholesale Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 42.7/100 places it at rank #3163 in our full 7,333-stock universe. At $515M in market capitalization, MGP INGREDIENTS INC is a small-cap player in the Wholesale Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -31% combined with momentum at the 27th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 39% (+16.1pp vs sector) narrow to operating margins of 12% (+9.1pp vs sector) and net margins of 8.5%, yielding a gross-to-net conversion rate of 22%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $25.82, MGP INGREDIENTS INC is trading near fair value based on current fundamentals. Our value factor score of 67/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 10.9x (a 43% discount to the sector median of 19.1x), EV/EBITDA of 7.5x (near the sector median), P/B of 0.7x, P/S of 1.0x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to MGP INGREDIENTS INC. The stock presents a balanced risk profile: weak quality scores (28th percentile) and low beta of 0.61 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: weak quality scores (28th percentile); low beta of 0.61 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 66th percentile and quality factor at the 28th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (66th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate MGP INGREDIENTS INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 5.9%, and the balance sheet is managed within acceptable parameters (D/E: 61%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; MGP INGREDIENTS INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.98% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, MGP INGREDIENTS INC receives a Reduce rating with a composite score of 42.7/100 (rank #3163 of 7,333). Our quantitative framework assigns a No Moat (34/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 46/100.

Our analysis does not support a constructive view on MGP INGREDIENTS INC at this time. The combination of limited competitive advantages, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.