Canada’s primary stock market has shown resiliency amid massive headwinds in the last 12 months. As of this writing, the TSX is up 17.9% year-to-date and boasts a 29.3% gain in one year. However, some stocks trade way below their perceived or assumed intrinsic values despite the market’s toughness.
Mattr Corp (TSX:MATR) belongs to the outperforming energy sector (+15.2% year-to-date) but is down nearly 20%. You can purchase the stock for only $12.14. Nonetheless, it deserves serious consideration. Given the strong fundamentals and long growth runway, you’d invest in an undervalued gem with enormous potential.
New identity
Mattr Corp was Shawcor Ltd. before management decided to rebrand in January 2024 and focus on infrastructure technology. Its President and CEO, Mike Reeves, said, “With our portfolio transformation now complete, this official name change is a formality, but an important step in solidifying our new identity.”
Today, Mattr is an $815.7 million growth-oriented, global materials technology company operating under various brands. It caters to vital industries and delivers sustainable solutions to clients in the energy, aeronautics, automotive, communications, transportation, utilities, and waste management markets. Two core segments, Composite Technologies and Connection Technologies, contribute to revenues.
Mattr leverages its materials and manufacturing expertise to win infrastructure projects. It has a global reach and is present in North and South America, Asia, Europe, Africa, and the Middle East. According to management, the current organic investments position the company for high-return future growth.
Large and growing end markets
“Our businesses serve large and growing end markets, we have a robust balance sheet, have made significant investments intended to continue driving high return organic growth in future years, are actively seeking to complete meaningful, accretive acquisitions,” Reeves said.
In Q2 2024, revenue increased 1.4% to $253.8 million versus Q2 2023, while net income declined 84.1% year-over-year to $2 million.
Still, Reeves believes Mattr achieved strong operational results, notwithstanding market and geopolitical challenges. He forecasts substantial shareholder value creation over the coming years as Mattr hits its growth, profitability, and free-cash-flow (FCF) conversion objectives.
Mattr’s capital growth plans of $100 million in 2024 include growth capex. Management said there’s a clear opportunity to organically double revenue by 2030 through M&A activities. In addition, it is targeting a 20%-plus adjusted EBITDA margin and 70%-plus FCF conversion.
Furthermore, Mattr’s North American production footprint modernization, expansion, and optimization (MEO) strategy is ongoing. The addition of four new production facilities in the U.S. will boost capacity and create efficiency in its operating network. Also, the initial footprint, at the current segment margin, is expected to bring $150M in annual incremental revenue.
Back-to-back winner
MATR is among the 30 top-performing Canadian stocks, owing to 183%-plus three-year performance (dividend-adjusted share price) and a 166% increase in market capitalization in the same period. The energy constituent ranked 16th in the 2024 TSX30 List, the flagship program for high-growth stocks.
In the 2023 annual ranking, it placed seventh as Shawcor Ltd. Reeves assures that MATR invested heavily in 2023 and 2024 to grow the core businesses organically.
