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Mastech Digital (NYSE: MHH) is in the midst of a transformation of itself and its industry. Its traditional staffing business, where it supplied systems engineers to aid clients in building software and IT systems, is greatly impacted by AI, which, when used as a tool, makes people far more efficient, and the same amount of work can be done with fewer staffers. Fortunately, the rest of its business helps customers take advantage of AI capabilities, and this higher-margin business should allow the company to pivot without as much disruption as pure staffing companies. To facilitate this, the company spent last year cutting costs and low-margin business so it could invest in the pivot. So far, it has managed to stay profitable while it invests, and its AI-centric business has now shown two sequential quarters of revenue growth, combined with gross margin improvement. It is now in its seasonally weak Q4, and we expect that quarter to be similar to this just-reported Q3.
It now offers three core products in its Data & AI segment:
- Modern Data modernizes enterprise data and makes it usable at scale for insights, analytics, and AI. The offering is supported by a governance layer designed to keep data trusted and secure.
- AI Governance, Trust and Safety establishes the security guardrails, governed data access, enriched knowledge bases, model evaluation, and oversight needed to scale AI responsibly across the enterprise.
- Applied AI turns enterprise knowledge into solutions for targeted business problems. It combines agentic technology with Mastech’s engineering talent to move solutions into production so they can scale and be adopted rather than remain pilots.
These products generate higher gross margins and customer stickiness as one project grows to many throughout an organization.
Since the company has $3.12 per share in cash and no debt, the stock is now trading at an enterprise value of $39 million with a revenue run rate of $168 million and profits. Its peers trade at 2.1 times EV/2026 estimated sales while it trades at 0.2 times. As margins move up and revenue growth returns, we believe so will the stock price. We are slightly lowering our expectations for 2027, as we think the Talent headwinds are greater than expected as the consultant count continues to drop and opportunities decrease. We now expect 2027 revenues of $170 million and non-GAAP EPS of $0.46.
If we apply a multiple of 0.6 to Mastech’s forecasted 2026 revenues, the company would have a market capitalization of $138 million, or approximately $11.50 per share.
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