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 declines of 4.7% over the last two years suggest its demand continued shrinking.

This quarter, Matrix Service reported year-on-year revenue growth of 6.9%, and its $187.2 million of revenue exceeded Wall Street’s estimates by 1.1%.

Looking ahead, sell-side analysts expect revenue to grow 38.3% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and implies its newer products and services will spur better top-line performance.

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Operating Margin

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 5.1% 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.

Looking at the trend in its profitability, Matrix Service’s operating margin decreased by 4.5 percentage points over the last five years. The company’s performance was poor no matter how you look at it - it shows operating expenses were rising and it couldn’t pass those costs onto its customers.

In Q4, Matrix Service generated a negative 3.4% operating margin. The company's consistent lack of profits raise a flag.

Earnings Per Share

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 more than its revenue over the last five years, dropping 24.5% annually. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

Diving into the nuances of Matrix Service’s earnings can give us a better understanding of its performance. As we mentioned earlier, Matrix Service’s operating margin was flat this quarter but declined by 4.5 percentage points over the last five years. Its share count also grew by 3.3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Matrix Service, its two-year annual EPS growth of 16% 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 Q4, Matrix Service reported EPS at negative $0.20, down from negative $0.18 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Matrix Service’s full-year EPS of negative $1.20 will flip to positive $0.68.

Key Takeaways from Matrix Service’s Q4 Results

We were impressed by how significantly Matrix Service blew past analysts’ EBITDA expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed significantly, which seems to be weighing on shares. The stock traded down 14.7% to $11.98 immediately following the results.

So should you invest in Matrix Service right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free .