Matthews (MATW)

Diversified solutions provider Matthews International (NASDAQ:MATW) reported Q4 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 29.1% year on year to $284.8 million. Its non-GAAP loss of $0.19 per share was significantly below analysts’ consensus estimates.

Company Overview

Originally a death care company, Matthews International (NASDAQ:MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies.

Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to do serve customers better.

Competitors offering ceremonial products include Service Corporation International (NYSE:SCI) and private company Aurora Casket. Competitors offering brand solution services include private company Interbrand while competitors in the industrial technologies sector include Hitachi Construction Machinery (TSE:6305).

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Matthews struggled to consistently generate demand over the last five years as its sales dropped at a 1.9% annual rate. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Matthews’s recent performance shows its demand remained suppressed as its revenue has declined by 14.3% annually over the last two years.

This quarter, Matthews’s revenue fell by 29.1% year on year to $284.8 million but beat Wall Street’s estimates by 0.8%.

Looking ahead, sell-side analysts expect revenue to decline by 21.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Matthews’s operating margin has been trending up over the last 12 months and averaged 7% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports inadequate profitability for a consumer discretionary business.

In Q4, Matthews generated an operating margin profit margin of 34.2%, up 32.6 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Matthews, its EPS declined by 22% annually over the last five years, more than its revenue. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

In Q4, Matthews reported adjusted EPS of negative $0.19, down from $0.14 in the same quarter last year. This print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Over the last two years, Matthews’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 1.3%, meaning it lit $1.32 of cash on fire for every $100 in revenue.

Matthews burned through $57.25 million of cash in Q4, equivalent to a negative 20.1% margin. The company’s cash burn increased from $34.54 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Matthews historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.3%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

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. Fortunately, Matthews’s ROIC averaged 4.9 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

Matthews reported $31.36 million of cash and $537 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $182.8 million of EBITDA over the last 12 months, we view Matthews’s 2.8× net-debt-to-EBITDA ratio as safe. We also see its $58.23 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Matthews beat analysts’ EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EPS missed. Overall, this was a weaker quarter. The stock remained flat at $26.46 immediately after reporting.

Updated: February 3, 2026 at 4:49 PM EST

Before deciding whether to buy Matthews or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies serving everyday consumers, but in the case of Matthews, we’ll be cheering from the sidelines. To begin with, its revenue has declined over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Matthews’s declining EPS over the last five years makes it a less attractive asset to the public markets, and its projected EPS for the next year is lacking.

Matthews’s price-to-sales ratio based on the trailing 12 months is 0.6x. The market typically values companies like Matthews based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere.

Wall Street analysts have a consensus one-year price target of $38 on the company (compared to the current share price of $26.46).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.