Contra Guys: Mattr Corp’s multi-year turnaround shows promise despite market setbacks

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The Toronto-based materials technology enterprise is successfully executing a multi-year transformation

How long does a corporate turnaround take? The answer varies widely – in an optimistic scenario, the answer may be a few years, while in pessimistic cases, the answer may be never. Accordingly, investors interested in transition candidates must have significant patience as well as a rigorous methodology for sussing out possible turnaround winners from losers..

which is the current assets divided by current liabilities – was regularly well over 2.0, debt was stable, and the share count had been flat for a decade. Insiders owned roughly 1.5 per cent of the stock at the time, and Turtle Creek, the successful independent asset manager based in Toronto, owned 17.8 per cent.

In late 2023, Mattr unveiled its post-oil-and-gas roadmap through 2030. The plan can be divided into two phases. During the first stage, the organization will spend more than $150-million in capex to build out, modernize, and optimize its production footprint by 2025. The executive team hopes these investments will increase annual sales growth by over 10 per cent a year through 2030, expand EBITDA margins by over 20 per cent, and be done with a free cash flow conversion rate of over 70 per cent.

Despite the pivot into growth sectors and the outlook through 2030, the stock has been in the doldrums for 2024, being roughly flat year-to-date. The second quarter saw top-line improvements, but earnings a share missed consensus analyst estimates. Moreover, the fact that two new production facilities came online was overshadowed by weak third-quarter guidance owing to a project deferral by a significant customer.

 

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