Download PDF

1. Company Snapshot

1.a. Company Description

Mastech Digital, Inc., together with its subsidiaries, provides digital transformation IT services to large, medium-sized, and small companies in the United States.It operates through two segments, Data and Analytics Services, and IT Staffing Services.The company offers data management and analytics services, including project-based consulting services in the areas of master data management, enterprise data integration, big data and analytics, and digital transformation by using onsite and offshore resources.


It also provides a range of IT staffing services in the areas of data management and analytics, cloud, mobility, social, automation, business intelligence/data warehousing, web services, enterprise resource planning and customer resource management, and e-business solutions.In addition, the company offers digital transformation services, such as digital learning services; and cloud-based enterprise application across sales, marketing, and customer service organizations.It provides its services across various industry verticals, including financial services, government, healthcare, manufacturing, retail, technology, telecommunications, and transportation.


The company was formerly known as Mastech Holdings, Inc.and changed its name to Mastech Digital, Inc.in September 2016.


Mastech Digital, Inc.was founded in 1986 and is headquartered in Pittsburgh, Pennsylvania.

Show Full description

1.b. Last Insights on MHH

Mastech Digital's recent performance was negatively driven by escalating costs and uncertainty around new leadership. The company's Q4 2024 earnings revealed a 10.2% revenue growth, but the Data and Analytics Services Segment's 26.2% growth was offset by rising expenses. The appointment of Nirav Patel as President and CEO, effective January 6, 2025, may bring uncertainty to the company's strategy and direction. Additionally, the company's high executive compensation, including Patel's non-qualified stock options, may weigh on investor sentiment.

1.c. Company Highlights

2. Mastech Digital's Q3 Earnings: A Step Towards Sustainable Growth

Mastech Digital reported Q3 revenues of $48.5 million, a 6.4% year-over-year decline, with IT Staffing Services and Data and Analytics Services segments contributing $40.6 million and $7.9 million, respectively. Despite the revenue decline, the company's non-GAAP operating margin expanded by 190 basis points, driven by the EDGE program's focus on process simplification, automation, and disciplined spend management. The company's GAAP net income was $0.9 million or $0.08 per diluted share, while non-GAAP net income was $3.5 million or $0.29 per diluted share, beating analyst estimates of $0.17.

Publication Date: Nov -19

📋 Highlights
  • EDGE Program Initiated:: Launched a transformation initiative to optimize operations, aiming for higher revenue quality, automation, and disciplined spending, with early progress showing a 190 bps increase in non-GAAP operating margin.
  • Q3 Revenue Decline:: Consolidated revenue fell 6.4% YoY to $48.5M, with IT Staffing down 4.4% to $40.6M and Data & Analytics down 15.8% to $7.9M.
  • Financial Resilience:: GAAP net income dropped to $0.9M ($0.08 diluted EPS) from $1.9M ($0.16), but non-GAAP net income rose to $3.5M ($0.29), with $32.7M cash liquidity and no debt.
  • Bill Rate Growth:: Average bill rate increased 4% to 86.6% (from 83.6%), driven by high-value Data & Analytics work, improving gross margins and revenue quality.

Operational Efficiency and Cost Savings

The EDGE program has been instrumental in driving operational efficiency and cost savings, with early progress indicating improved resource alignment and a higher-quality revenue stream. As Kannan Sugantharaman, CFO, noted, "We've focused on high-value accounts and work, particularly in Data & Analytics. This shift has led to a higher-quality revenue stream and improved margins." The program is expected to continue yielding cost savings and driving sustainable value creation.

Valuation and Growth Prospects

Mastech Digital's valuation metrics suggest a relatively attractive profile, with a P/S Ratio of 0.42 and an EV/EBITDA ratio of 20.52. The company's ROE is negative, but ROIC is 8.5%, indicating a decent return on invested capital. Analysts estimate revenue growth of 3.6% next year, which, combined with the company's efforts to drive higher-value accounts and work, could lead to improved profitability. With a solid liquidity position, including $32.7 million in cash balances and no bank debt, Mastech Digital is well-positioned to execute its transformation agenda.

Future Outlook and Shareholder Returns

Mastech Digital plans to continue its share buyback efforts in Q4, including considering another Rule 10b5-1 plan. The company's focus on driving higher-value accounts and work, particularly in Data & Analytics, is expected to lead to improved margins and revenue growth. With a Free Cash Flow Yield of 12.67%, the company has the potential to return value to shareholders while investing in its growth initiatives.

3. NewsRoom

Card image cap

Mastech Digital, Inc. (MHH) Q3 2025 Earnings Call Transcript

Nov -12

Source: seekingalpha.com

Card image cap

Mastech Digital Reports Third Quarter 2025 Results

Nov -12

Source: prnewswire.com

Card image cap

Mastech Digital to Discuss Third Quarter Financial Results on November 12, 2025

Nov -03

Source: prnewswire.com

Card image cap

Mastech Digital, Inc. (MHH) Q2 2025 Earnings Call Transcript

Aug -13

Source: seekingalpha.com

Card image cap

Mastech Digital Reports 2% Sequential Revenue Growth for the Second Quarter of 2025

Aug -13

Source: prnewswire.com

Card image cap

Mastech Digital, Inc. to Discuss Second Quarter Financial Results on August 13, 2025

Jul -31

Source: prnewswire.com

Card image cap

Mastech Digital, Inc. (MHH) Q1 2025 Earnings Call Transcript

May -16

Source: seekingalpha.com

Card image cap

Mastech Digital Reports First Quarter 2025 Revenue Growth of 3%

May -16

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.75%)

6. Segments

IT Staffing Services

Expected Growth: 3.0%

Mastech Digital's 3.0% growth in IT Staffing Services is driven by increasing demand for digital transformation, cloud adoption, and cybersecurity expertise. Additionally, the rise of remote work and talent scarcity in the IT sector contribute to the growth. The company's expertise in providing specialized IT professionals and its strong client relationships also support this growth.

Data and Analytics Services

Expected Growth: 1.5%

Mastech Digital's 1.5x growth in Data and Analytics Services is driven by increasing demand for digital transformation, adoption of cloud-based solutions, and need for data-driven decision making. Additionally, the company's expertise in emerging technologies like AI, ML, and IoT, and its ability to provide end-to-end solutions, are key growth catalysts.

7. Detailed Products

Digital Transformation

Mastech Digital's digital transformation services help organizations navigate the complexities of digital change, from strategy to implementation.

Cloud Services

Mastech Digital's cloud services provide scalable, secure, and efficient cloud solutions to help organizations optimize their IT infrastructure.

Data Analytics

Mastech Digital's data analytics services help organizations make data-driven decisions by providing insights and intelligence from their data.

Cybersecurity

Mastech Digital's cybersecurity services help organizations protect their IT infrastructure and data from cyber threats.

IT Staffing

Mastech Digital's IT staffing services provide skilled IT professionals to help organizations fill talent gaps and meet project deadlines.

8. Mastech Digital, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Mastech Digital, Inc. operates in the IT staffing and consulting services industry, where there are many substitutes available. However, the company's strong brand reputation and long-standing relationships with clients help to mitigate the threat of substitutes.

Bargaining Power Of Customers

Mastech Digital, Inc.'s customers are primarily large enterprises, which have limited bargaining power due to the company's specialized services and expertise.

Bargaining Power Of Suppliers

Mastech Digital, Inc. relies on a network of independent contractors and consultants, which gives them some bargaining power. However, the company's scale and reputation help to mitigate this threat.

Threat Of New Entrants

The IT staffing and consulting services industry has high barriers to entry, including the need for specialized expertise and established relationships with clients. This makes it difficult for new entrants to compete with Mastech Digital, Inc.

Intensity Of Rivalry

The IT staffing and consulting services industry is highly competitive, with many established players competing for market share. Mastech Digital, Inc. must continually innovate and differentiate itself to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 5.87%
Debt Cost 6.58%
Equity Weight 94.13%
Equity Cost 6.58%
WACC 6.58%
Leverage 6.24%

11. Quality Control: Mastech Digital, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Upwork

A-Score: 5.7/10

Value: 4.8

Growth: 8.6

Quality: 8.2

Yield: 0.0

Momentum: 9.5

Volatility: 3.3

1-Year Total Return ->

View Full Report
Stock-Card
HireQuest

A-Score: 4.2/10

Value: 3.9

Growth: 4.4

Quality: 7.2

Yield: 4.0

Momentum: 1.0

Volatility: 4.7

1-Year Total Return ->

View Full Report
Stock-Card
GEE Group

A-Score: 3.5/10

Value: 9.8

Growth: 2.7

Quality: 3.0

Yield: 0.0

Momentum: 2.0

Volatility: 3.7

1-Year Total Return ->

View Full Report
Stock-Card
Hudson Global

A-Score: 3.2/10

Value: 9.4

Growth: 0.9

Quality: 4.4

Yield: 0.0

Momentum: 0.0

Volatility: 4.7

1-Year Total Return ->

View Full Report
Stock-Card
ZipRecruiter

A-Score: 3.0/10

Value: 6.0

Growth: 3.6

Quality: 6.2

Yield: 0.0

Momentum: 0.0

Volatility: 2.3

1-Year Total Return ->

View Full Report
Stock-Card
Mastech Digital

A-Score: 2.9/10

Value: 4.8

Growth: 2.9

Quality: 5.2

Yield: 0.0

Momentum: 1.5

Volatility: 3.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

7.25$

Current Price

7.25$

Potential

-0.00%

Expected Cash-Flows