Matrix Service (MTRX)

Industrial construction and maintenance company Matrix Service (NASDAQ:MTRX) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 28% year on year to $211.9 million. The company’s full-year revenue guidance of $900 million at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP loss of $0.01 per share was $0.03 below analysts’ consensus estimates.

Company Overview

Founded in Oklahoma, Matrix Service (NASDAQ:MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.

Construction and maintenance services companies not only boast technical know-how in specialized areas but also may hold special licenses and permits. Those who work in more regulated areas can enjoy more predictable revenue streams - for example, fire escapes need to be inspected every five years. More recently, services to address energy efficiency and labor availability are also creating incremental demand. But like the broader industrials sector, construction and maintenance services companies are at the whim of economic cycles as external factors like interest rates can greatly impact the new construction that drives incremental demand for these companies’ offerings.

Competitors in the industrial and construction sectors include Fluor Corporation (NYSE:FLR), McDermott International (NYSE: MDR), and Chicago Bridge & Iron (NYSE:CBI)

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Matrix Service’s demand was weak and its revenue declined by 2.9% per year. This wasn’t a great result and suggests it’s a lower quality business.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Matrix Service’s annualized revenue growth of 2% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Matrix Service reported robust year-on-year revenue growth of 28%, and its $211.9 million of revenue topped Wall Street estimates by 2.5%.

Looking ahead, sell-side analysts expect revenue to grow 11.8% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will fuel better top-line performance.

Matrix Service has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 3.8% gross margin over the last five years. That means Matrix Service paid its suppliers a lot of money ($96.16 for every $100 in revenue) to run its business.

Matrix Service produced a 6.7% gross profit margin in Q3, up 2 percentage points year on year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Matrix Service’s high expenses have contributed to an average operating margin of negative 5.6% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Matrix Service’s operating margin rose by 4.9 percentage points over the last five years. Still, it will take much more for the company to reach long-term profitability.

Matrix Service’s operating margin was negative 2.6% this quarter. The company's consistent lack of profits raise a flag.

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.

Sadly for Matrix Service, its EPS declined by 66.3% 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.

Diving into the nuances of Matrix Service’s earnings can give us a better understanding of its performance. A five-year view shows Matrix Service has diluted its shareholders, growing its share count by 6.6%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Matrix Service, its two-year annual EPS growth of 28.1% was higher than its five-year trend. Its improving earnings is an encouraging data point, but a caveat is that its EPS is still in the red.

In Q3, Matrix Service reported adjusted EPS of negative $0.01, up from negative $0.33 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.

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.

Matrix Service has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.7%, lousy for an industrials business.

Taking a step back, an encouraging sign is that Matrix Service’s margin expanded by 10.2 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Matrix Service burned through $27.91 million of cash in Q3, equivalent to a negative 13.2% margin. The company’s cash flow turned negative after being positive in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Matrix Service is a well-capitalized company with $217.3 million of cash and $20.36 million of debt on its balance sheet. This $196.9 million net cash position is 46% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Matrix Service beat analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance slightly exceeded Wall Street’s estimates. On the other hand, its EBITDA missed and its EPS was in line with Wall Street’s estimates. Overall, this quarter was mixed. The stock remained flat at $15.60 immediately following the results.

Updated: December 4, 2025 at 10:36 PM EST

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

Matrix Service isn’t a terrible business, but it isn’t one of our picks. To begin with, its revenue has declined over the last five years. And while its rising cash profitability gives it more optionality, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its operating margins reveal poor profitability compared to other industrials companies.

Matrix Service’s P/E ratio based on the next 12 months is 22.2x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $16.50 on the company (compared to the current share price of $11.97).

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.