After recently restating its financials dating back to 2018 Astec Industries (ASTE), a road building equipment manufacturer, has identified new accounting errors that resulted in erroneous income tax provision calculations over multiple years.

In its latest annual report Astec says in Q4 2024 it discovered it had miscalculated its income tax provision over an unspecified number of years:

“The cumulative effect of the errors generated in prior years was corrected during the fourth quarter of 2024, resulting in an increase in "Income tax provision" of $2.7 million.”

The correction increased Astec’s 2024 income tax provision 38%.

The company characterized it as immaterial.

It’s the latest in a string of accounting errors dating back seven years.

In Q1 2022, Astec said it had understated Cost of Sales between 2018-2021. The company also overstated revenue in 2021, resulting in net income being overstated by 12.5%.

Astec deemed the errors immaterial.

In Q1 2023, Astec said it had over-accrued for “inventory related expenses” in 2021 and 2022, resulting in a $1.9 million decrease in Cost of Sales.

In March 2023, Astec fired its auditor, KPMG, and hired Deloitte, which received a 14.8% fee increase in 2024.

When DuDil asked if the latest corrections were to financial statements that were already previously corrected, Astec told us:

“The majority of adjustments were made for 2023 entries.”

With an Enterprise Value (EV) of approximately $868 million, Astec is priced as if it will grow annual sales to more than $2.8 billion, up from an estimated $1.3 billion in 2025. To justify its current share price of $36.65 our Reverse DCF— which quantifies investor expectations embedded in the current share price— indicates Astec must:

—Grow sales 9% annually between 2027-2034, significantly faster than the company’s estimated 2025 and 2026 sales growth of 4% and 4.3%, respectively, and the three-year average of 6.3%
—Immediately increase NOPAT margin to 6.4%, significantly higher than our 2024 estimate of 1.02% and our 3-year average estimate of 1.1%
—Increase Invested Capital (IC) Turns to 1.7 from our 2024 estimate of 1.55

Notably, the current share price also implies Sprout increases Return on Invested Capital (ROIC) to 10.8% from our 3-year average estimate of 1.79%: