Over the last six months, Matson’s shares have sunk to $105.96, producing a disappointing 19.9% loss - a stark contrast to the S&P 500’s 15.5% gain. This might have investors contemplating their next move.
Is now the time to buy Matson, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Matson Not Exciting?
Even with the cheaper entry price, we're cautious about Matson. Here are three reasons we avoid MATX and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Matson’s recent performance shows its demand has slowed as its annualized revenue growth of 1% over the last two years was below its five-year trend. We also note many other Marine Transportation businesses have faced declining sales because of cyclical headwinds. While Matson grew slower than we’d like, it did do better than its peers. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Matson’s revenue to drop by 11.8%, a decrease from its 10% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Matson’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Matson isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 11.8× forward EV-to-EBITDA (or $105.96 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the Amazon and PayPal of Latin America.
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