Should You Buy Mister Car Wash IPO Stock?

The IPO calendar for this week looks solid. Full Truck Alliance and Sprinklr have gone public, with both stocks soaring on their listing day. Mister Car Wash is expected to list next, on Jun. 25. Should you buy the IPO, or give it a miss?

Founded in 1996, Mister Car Wash is the largest car wash brand in the U.S. At the end of Q1 2021, the company had 344 locations in 21 states. The company also has a subscription service, Unlimited Wash Club, and had 1.4 million subscribers the end of Q1 2021. Around 62 percent of the company's wash sales in the quarter came from subscribers.

Mister Car Wash has opted for the traditional IPO route instead of via a SPAC (special purpose acquisition company) merger, which has emerged as an attractive option for companies looking to go public.

Mister Car Wash is expected to go public on Jun. 25. The company is looking to sell 37.5 million shares, of which six million are being offered by existing shareholders. Morgan Stanley, BofA Securities, Jefferies, Goldman Sachs, BMO Capital Markets, and UBS Investment Bank are the joint bookrunners for the IPO.

Mister Car Wash's initial IPO price is $15–$17, but that could change if it gets a good response. Most of the companies that went public in 2020 priced their IPOs above their initial range. The company is set to list on the NYSE under the ticker symbol “MCW”.

Mister Car Wash is a profitable company, unlike many of the tech companies that have gone public over the last year. In 2020, the company's revenue fell year-over-year to $574.9 million from $629.5 million, driven by the COVID-19 pandemic and related restrictions.

Mister Car Wash posted a net income of $60.4 million in 2020, much higher than the $920,000 it posted in 2019. A sale of $38 million in assets in 2020 boosted its profitability.

At the midpoint of its IPO price range, Mister Car Wash will have a market value of $5.3 billion, meaning a 2020 price-to-sales multiple of 9.23x. After accounting for its sale of assets, the company posted an adjusted net income of $22.6 million in 2020, which implies a 2020 price-to-earnings multiple of 234x.

Since Mister Car Wash has yet to list, we don’t have a forecast yet. However, the valuation it's seeking looks on the higher side, even after accounting for the impact of COVID-19 restrictions.

Once Mister Car Wash stock starts trading, you can buy it through your stockbroker. You may place either a limit or market order.