Enerpac Tool Group (EPAC) saw its stock price plummet by 5.12% in Friday's trading session, despite reporting a 5.5% increase in revenue for its third quarter of fiscal 2025. The sharp decline suggests investors may be focusing on the company's slight profitability squeeze rather than its top-line growth.

According to the company's latest financial report, Enerpac Tool Group's net sales rose to $159 million, up from $150 million in the same quarter last year. The Industrial Tools & Service (IT&S) segment, which forms the core of the company's business, contributed significantly with a 5.1% increase in sales. However, profitability metrics showed some weakness, with the gross margin decreasing by 140 basis points to 50.4%, and the adjusted EBITDA margin dropping by 50 basis points to 25.9%.

While Enerpac Tool Group managed to increase its adjusted EBITDA by 3% to $41 million and boost its adjusted EPS by 9% to $0.51, the market's negative reaction suggests that investors may be concerned about the company's ability to maintain its profit margins in the face of rising costs. The lack of forward guidance in the report may have also contributed to investor uncertainty, leading to the significant stock price drop.