Food and beverage supplier MGP Ingredients (NASDAQ: MGPI) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 23.7% year on year to $145.5 million. The company expects the full year’s revenue to be around $530 million, close to analysts’ estimates. Its non-GAAP profit of $0.97 per share was 47.3% above analysts’ consensus estimates.

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Company Overview

Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $609.4 million in revenue over the past 12 months, MGP Ingredients is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, MGP Ingredients struggled to generate demand over the last three years. Its sales dropped by 6% annually, a rough starting point for our analysis.

This quarter, MGP Ingredients’s revenue fell by 23.7% year on year to $145.5 million but beat Wall Street’s estimates by 3.7%.

Looking ahead, sell-side analysts expect revenue to decline by 15.4% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and indicates its products will face some demand challenges.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

MGP Ingredients has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.7% over the last two years, slightly better than the broader consumer staples sector.

Taking a step back, we can see that MGP Ingredients’s margin expanded by 5.3 percentage points over the last year. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

MGP Ingredients broke even from a free cash flow perspective in Q2. This cash profitability was in line with the comparable period last year but below its two-year average. In a silo, this isn’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Key Takeaways from MGP Ingredients’s Q2 Results

We were impressed by how significantly MGP Ingredients blew past analysts’ EPS expectations this quarter. We were also excited its gross margin outperformed Wall Street’s estimates by a wide margin. On the other hand, its full-year revenue guidance was in line. Zooming out, we think this was a solid print. The stock traded up 2% to $29.95 immediately following the results.

Sure, MGP Ingredients had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.