Valuation Scorecard: Stock Rating C-High Neutral (4/9/24)-Matrix Service Co (MTRX).

Matrix Service’s common shares will need to reach $22 to achieve average annual stock market performance of 9.0% over the next 6 years. Matrix Service’s stock price will need to reach $26 by 2029 to achieve upper quartile performance. 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, low financial strength, and very low profitability.
• 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 1.2% 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 past 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, Revenue Growth, and Equity 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.
• Return on Equity, Pretax ROA, and Pretax Margin are group lagging. These factors have negatively affected market perceptions of Matrix Service. 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 above average with above 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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