MATTR CORP (MATR.TO)

(Note the short timeframe.)  Lots of challenges. In deep-value territory. Missing a positive catalyst. Exposed to tariffs, especially as we head into CUSMA negotiations. Management is now cautious on 2026. Elevated leverage. 

Less visibility for a few quarters, so he exited. Waiting for a catalyst to get back in. If you're patient for 2 years minimum, potential for high upside.

MATR is beginning to trend sideways over the past month, but the overall trend is still quite negative. Earnings growth rates are trending lower, and so are analyst estimates. It trades at a decent valuation of 0.4X forward sales and 20X forward earnings, but we are not huge fans of the recent negative momentum, and we would prefer to see the stock begin to hit 'higher highs and higher lows' before getting interested here.
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Margin expansion will start next year. Is a diversified industrial with 10% annualized growth in their verticals. Has taken time to transform and are close to it. Expects a rise in cash flow and profits. Lead market share in water tanks, for instance, at gas/EV stations.

MATR has been buying back shares aggressively in recent quarters; the company repurchased 9% of its shares outstanding in the last twelve months. That being said, MATR just recently went through a large acquisition, which boosted the company’s debt level to an unsustainably high level. The company’s net debt/EBITDA is around 4.1x, which is quite high for a cyclical company. We think MATR could be more “investable” if the company manages to pay down debt to more reasonable levels.
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Major transformation over last few years. Two main businesses: specialty wire & cable, and composite technologies (underground tanks, increasingly used to hold water for data centre cooling). Will benefit from infrastructure investment and electrification. Really likes management.

Many still think of its legacy business of tubing for the oil & gas industry, but that's a much smaller segment now. End of large capex spend on modernizing and expanding facilities, which should increase margins over time. This should lift FCF to be used to pay down debt and buy back shares. No dividend.

Great job. Sold non-core operations, now focused on high-quality business. High margins. Investing in organic initiatives with high rates of return, should see benefits early next year. Very diligent acquirers, promising not to overpay. Latest exposure significantly increases exposure to the US; will probably see topline benefits in 2H of next year.

Exposed to the right verticals such as infrastructure and electrification. Management is aiming for 20+% ROC after tax. He believes them; other investors are waiting to see. No dividend.

The last quarter was a bit mixed, and thus the stock has not done a whole lot this year (down 16%). The balance sheet has a bit of leverage (1.5X cash flow net), but is in significantly better shape than it was in prior cycles. It is expensive on current valution but very strong EPS growth is forecast for 2025 (more than 3X). It has seen a few broker downgrades since the quarter, but if it can execute on its growth plan in '25 we would expect investors to sit up and pay attention. It remains fairly cyclical so the economy does need to co-operate here. There has been a small amount of recent insider buying, which is positive. 
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