While the broader market has struggled with the S&P 500 down 3.3% since October 2024, Mister Car Wash has surged ahead as its stock price has climbed by 30% to $8.28 per share. This run-up might have investors contemplating their next move.

Is now the time to buy Mister Car Wash, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free .

We’re happy investors have made money, but we're swiping left on Mister Car Wash for now. Here are three reasons why there are better opportunities than MCW and a stock we'd rather own.

Why Do We Think Mister Car Wash Will Underperform?

Formerly known as Hotshine Holdings, Mister Car Wash (NYSE:MCW) offers car washes across the United States through its conveyorized service.

1. Same-Store Sales Falling Behind Peers

Investors interested in Specialized Consumer Services companies should track same-store sales in addition to reported revenue. This metric measures the change in sales at brick-and-mortar locations that have existed for at least a year, giving visibility into Mister Car Wash’s underlying demand characteristics.

Over the last two years, Mister Car Wash’s same-store sales averaged 1.7% year-on-year growth. This performance was underwhelming and suggests it might have to change its strategy or pricing, which can disrupt operations.

2. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Mister Car Wash’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Mister Car Wash burned through $81.46 million of cash over the last year, and its $1.87 billion of debt exceeds the $67.46 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Mister Car Wash’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Mister Car Wash until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Mister Car Wash, we’ll be cheering from the sidelines. With its shares beating the market recently, the stock trades at 20.6× forward price-to-earnings (or $8.28 per share). This multiple tells us a lot of good news is priced in - you can find better investment opportunities elsewhere. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy .

Stocks We Like More Than Mister Car Wash

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week . This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free .