By Lisa Thompson
NYSE:MHH
READ THE FULL MHH RESEARCH REPORT
Mastech Digital (NYSE:MHH) reported $191 million in revenues in the year ending 2025 versus $199 million in 2024, down 3.8%. The company has been specifically weeding out low-margin revenues and investing in services that are expected to yield higher profits going forward. As evidence, bill rates increased to $87.32 in the IT staffing business in Q4, so despite billable consultants being down 17%, revenues were only down 7%. The bill rate in Q3 was $86.60. The number of billable consultants was down to 840 by the end of the year, and is now even lower at 819. This portends a weak Q1 for staffing. On the positive side, D&A has a good sales quarter with bookings of 11.3 million, up 37% year over year, compared to $6.1 million in Q3 and $5.8 million in Q2, which was half of the $11.7 million in Q1 2025; however, some of the Q2 bookings were pulled forward into Q1.
It now has the one-time charges for severance and redundant finance and accounting behind it, and going forward, SG&A should be much reduced, improving profitability. The macro environment remains challenging, but the company was encouraged by the high level of renewals, stronger pricing, and stable margins.
The Data & Analytics segment is leading the charge to bring AI into its main offerings. It is investing by bringing on senior AI management and vertical-specific salespeople who can create the service offerings that will enable Mastech to give customers what they need to incorporate AI into their businesses. It is focusing on banking and finance, health services, and retail and consumer verticals, all of which are being rapidly disrupted by AI, and need to act to avoid being left behind. As an example, the company is working with a major retailer that is having trouble being seen on major AI platforms. Mastech is helping them show up on Anthropic and ChatGPT as these platforms drive more sales to consumers. Agentic AI threatens this industry as it shifts from search engines and inadequate search functions on websites and platforms such as Amazon and eBay. Mastech hopes to become known as specialists in these verticals and be able to penetrate more accounts with its expertise.
Today, MHH trades at a fully diluted enterprise value of $44 million and is undervalued compared to its peers. This is 0.2 times its enterprise value to 2026 estimated sales, compared to its peers, who trade at 1.7 times. It has $3.09 in cash per share and no debt.
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