Matthews (MATW)

Diversified solutions provider Matthews International (NASDAQ:MATW) reported Q3 CY2025 results topping the market’s revenue expectations, but sales fell by 28.6% year on year to $318.8 million. Its GAAP loss of $0.88 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).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Matthews struggled to consistently increase demand as its $1.50 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Matthews’s recent performance shows its demand remained suppressed as its revenue has declined by 10.8% annually over the last two years.

This quarter, Matthews’s revenue fell by 28.6% year on year to $318.8 million but beat Wall Street’s estimates by 9.6%.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.

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 down over the last 12 months and averaged 3.6% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

This quarter, Matthews generated an operating margin profit margin of negative 3.6%, down 16.3 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Matthews’s full-year earnings are still negative, it reduced its losses and improved its EPS by 22.4% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q3, Matthews reported EPS of negative $0.88, up from negative $2.21 in the same quarter last year. Despite growing year on 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.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Matthews broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Matthews broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 5.1 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared 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 5%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

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, Matthews’s ROIC averaged 1.2 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Matthews reported $32.43 million of cash and $710.8 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 $187.5 million of EBITDA over the last 12 months, we view Matthews’s 3.6× net-debt-to-EBITDA ratio as safe. We also see its $61.2 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.

We were impressed by how significantly Matthews blew past analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its EPS missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $24.63 immediately after reporting.

Updated: December 4, 2025 at 10:14 PM EST

Are you wondering whether to buy Matthews or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies serving everyday consumers, but in the case of Matthews, we’ll be cheering from the sidelines. First off, its revenue growth was weak 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 P/E ratio based on the next 12 months is 21.8x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $38 on the company (compared to the current share price of $24.44).

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.