Matthews International Corp (MATW, Financial) has recently experienced a daily loss of 3.85%, alongside a 3-month decline of 13.73%, with a notable Loss Per Share of $1.98. Investors are often confronted with the pressing question: Is the stock fairly valued? To address this, we present a detailed valuation analysis that aims to uncover the true worth of Matthews International (MATW).
Company Introduction
Matthews International Corp is a multifaceted personal services company, with a significant presence in the United States and Europe. Its operations span across brand solution services, memorialization products, and industrial products. The majority of the company's revenue streams from its SGK Brand Solutions segment, which delivers a suite of services including brand development, printing equipment, and creative design services. Additionally, the Memorialization segment, which offers products for the cemetery and funeral home industries, makes a considerable contribution to the company's financials. With a stock price of $36.71 and a GF Value of $39, assessing Matthews International's valuation becomes crucial in determining if the current market price reflects the company's intrinsic value.
Summarize GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. A stock priced near the GF Value Line is considered fairly valued, suggesting that its future returns could closely align with the company's growth rate. Matthews International (MATW, Financial), with its market cap of $1.10 billion, appears to be trading at a fair value, given its current price and our GF Value estimation. This indicates that its long-term return may mirror the rate of business growth.
Financial Strength
Understanding a company's financial strength is essential to mitigate the risk of permanent capital loss. Metrics such as the cash-to-debt ratio and interest coverage can provide insights into this area. Matthews International's cash-to-debt ratio stands at 0.05, ranking lower than 92.22% of peers in the Conglomerates industry. This indicates a financial strength score of 4 out of 10, suggesting that the company's financial health could be better.
Profitability and Growth
Investing in profitable companies, particularly those with a track record of consistent profitability, tends to be less risky. Matthews International has maintained profitability for 7 out of the past 10 years, with a revenue of $1.90 billion and a Loss Per Share of $1.98 over the past year. Its operating margin of 3.83% ranks below more than half of its industry counterparts. The company's profitability is rated 6 out of 10, reflecting a fair level of profitability.
When it comes to growth, Matthews International's 3-year average annual revenue growth of 4.7% is moderate, while its 3-year average EBITDA growth rate of -33.4% is concerning, indicating challenges ahead.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another method to assess profitability. Ideally, ROIC should exceed WACC. Matthews International's ROIC is currently 4.26, which is less than its WACC of 9.23, indicating that the company may not be generating sufficient returns on its investments.
Conclusion
In sum, Matthews International (MATW, Financial) appears to be fairly valued at its current market price. However, the company's financial condition raises concerns, and its profitability and growth metrics suggest there are areas for improvement. For a deeper dive into Matthews International's financials, investors can explore the 30-Year Financials here.
To discover high-quality companies that may offer above-average returns, consider the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
