Matson has gotten torched over the last six months - since December 2024, its stock price has dropped 25.7% to $113.43 per share. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Matson, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Matson Not Exciting?
Even with the cheaper entry price, we're swiping left on Matson for now. Here are three reasons why there are better opportunities than MATX and a stock we'd rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Matson’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 5.3% over the last two years. Matson isn’t alone in its struggles as the Marine Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time. 
2. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Matson, its EPS declined by more than its revenue over the last two years, dropping 11.6%. This tells us the company struggled to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
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. Over the last few years, Matson’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Matson isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 11.4× forward P/E (or $113.43 per share). 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. We’d recommend looking at the most dominant software business in the world.
Stocks We Would Buy Instead of Matson
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