Valuation Scorecard: Stock Rating B-Positive (3/18/24)-Matrix Service Co (MTRX).

To achieve average annual stock market performance of 9.0% over the next 6 years, Matrix Service shares will need to reach $22. To achieve Upper quartile performance, Matrix Service’s stock price will need to reach $26 by 2029. At the current price of $13, what is the market’s view of Matrix Service’s future operating performance?

Executive Summary

• Matrix Service’s important characteristics: high expected growth, instability, very low profitability, and low financial strength.
• High valuation, leading shareholder returns. Current valuation levels are high relative to the Matrix Service Peer Group. Recent market returns have significantly outperformed the Matrix Service Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Matrix Service shares should reach a level of $14 by 2029 — an 1.0% per year total shareholder return. A 2029 stock price of $22 would reflect median performance and a price of $26 would be required to reach upper quartile performance.
• Matrix Service’s historical growth is slightly below average. Historical growth has been below average relative to the Matrix Service Peer Group and forecasted growth is relatively very high. EPS Growth, and Revenue Growth have lagged. These factors have negatively affected market perceptions of Matrix Service. Matrix Service’s historical income statement and balance sheet growth are not available. Matrix Service’s consensus growth expectations are lower than historical growth.
• Asset Turnover is group leading. Return on Equity, Pretax ROA, and Pretax Margin are group lagging. The company has very low cash and will have to work to generate attractive investments and improve valuation.
• Matrix Service’s risk profile is unfavorable. Overall variability has been only average with only average revenue variability, very high E.P.S. variability, and very low stock price volatility. Financial Strength is very low and earnings’ expectations are only average. The debt/capital ratio has risen very significantly.

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