Here's a Great Bargain You've Probably Never Heard Of

Matthews International is a small-cap company with a respectable long-term record. Its three operating divisions are noted below. From 2010 through 2019, all major metrics improved at reasonable compounded rates. Dividend growth outpaced the other metrics, rising greater than 185%. Fiscal 2020, which ends Sept. 30, is going to be a down earnings year due to virus-related problems and the loss of a fairly large account. Value Line and Yahoo Finance both see MATW's earnings per share dipping to about $2.50 to $2.58 from $3.31 a year earlier. But fiscal 2021 is likely to show significant improvement. What really jumps out is the chance to own MATW today at less than it fetched a full decade earlier. Buying now gives you more of everything at a significant discount, rather than the premium warranted by the last 10 years of growth. The firm garners pretty good ratings on what really matters. Its low score for stock price growth persistence simply reflects its very depressed price so far in 2020. What is MATW really worth? From 2010 through 2019, it carried an average price-to-earnings of 14.8-times, accompanied by about 1.18% in current yield. As of Monday, it was offered for just 7.4-times this year's estimate while yielding 4.54%. The stock's price-to-earnings and yield have never been more favorable than they are right now. Simply returning to a more typical valuation could send MATW quickly back up to $35. By the end of fiscal 2021 it could rebound into the $40 to $50 range. That's not a crazy idea. The stock gave investors exit opportunities north of $40 during each of the last eight years including 2020 year to date. Analysts at Yahoo Finance see things even more optimistically than I do. Their year-ahead goal price sits at $44 per share, a full 138% above MATW's current quote. Where else can you get a realistic chance at a double or better while collecting this generous a dividend while waiting for the move to take place? Value Line sees the shares as attractive for both the 18-month and three to five year time horizons. The numbers shown below were generated when MATW traded for $18.99. They are somewhat higher now, with MATW nearer to $18.50. With such high upside potential buying shares outright should be the preferred play. Traders without the cash to buy right away might wish to try for gains via put sales out to Dec. 18. Actual pricing for MATW's $17.50 and $20 puts are shown below. With MATW at $18.65, worst-case, forced purchase prices dropped to either $15.10 or $16.60 respectively. Those margins of safety would negate any damage even if MATW unexpectedly dips by from 11% to 19% from the trade inception price. Future stock market action can never be guaranteed. We can know for sure, though, that owning MATW at either of the two break-even prices would have been a winning position 100% of the time dating back more than a full dozen years. Company officers and directors have shown confidence in Matthews' long-term prospects. Since Feb. 28, there have been four insider buys totaling almost $188,000. Market action has presented us with the chance to own it way cheaper than they just paid. Ignore MATW's horrible share price momentum. Accept the gift of an all-time low valuation. Buy some shares, sell some puts or consider doing both.

Here's a Great Bargain You've Probably Never Heard Of

Matthews International is a small-cap stock with a solid long-term record and right now you can own it for less than it fetched a full decade ago.

Columnist Conversation

Tuesday Morning Fibocall for 1/25/2022

Capitulation?

Monday Morning Fibocall for 1/24/2022

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.