Tickers in this Article: MTRX, WHG, PEG, BP, CVX
A new book entitled "Warren Buffett Invests Like A Girl - And Why You Should, Too" is in the stores as of June 21. It's written by LouAnn Lofton, an editor of mine back when I did some writing for Fool.com. The main premise is that women are better investors than men. I've long wondered if this was so. In February, I recommended Dallas investment management company Westwood Holdings Group (NYSE:WHG), run by long-time money manager Susan Byrne. One of Westwood's funds is the SmallCap Value Fund (WHGSX), managed by a team of people including Lisa Dong, a Westwood employee since 2000. Women can and should run money as Lofton's book suggests. A holding that captures my attention is Matrix Service Co. (Nasdaq:MTRX), an industrial services contractor based in Tulsa, Oklahoma. With a growing business and plenty of cash, there's no reason to fear the Matrix. TUTORIAL: Stock Picking Strategies

The Business

Matrix's two operating segments are construction services and repair and maintenance services. Within those two segments are four main markets that include above-ground storage tanks, downstream petroleum, electrical and instrumentation, and specialty services. Work that Matrix might do includes the engineering, procurement and construction of above-ground storage tanks. It is one of the largest constructors in North America. In addition to construction, among other things, it provides repair and maintenance of these storage tanks, making it a one-stop shop for the energy business. In 2010, Public Service Enterprise Group (NYSE:PEG), BP (NYSE:BP) and Chevron (NYSE:CVX) accounted for 25% of its overall revenue, and while it is something to keep in mind as you consider an investment in the company, it shouldn't prevent you from pulling the trigger. Somebody has to provide these services. Why shouldn't it be Matrix? (For related reading, see The Importance Of Segment Data.)

Third Quarter Results

In a word, Matrix's Q3 was excellent. Revenues increased 11.7% to $136.3 million, while its operating profit increased to $7.6 million from the same period a year ago. More importantly, the gross and operating margins increased to 13.6% and 5.6%, respectively. To put this in perspective, in Q3 2007, its best year on record, revenues were higher at $168.7 million with a gross margin of 11.2% and an operating margin of 6.3%. Not quite back to the go-go days before the recession, but business is looking much brighter. Revenues for 2011 should be at least $630 million with earnings per share (EPS) at or near 75 cents. With a backlog of $383.9 million heading into the fiscal year-end, it's likely to rise above $400 million in the Q4. With the company running smoothly, it's a good time for incoming CEO John Hewitt to take the reins. It shouldn't skip a beat. (For more, see Analyzing Operating Margins.)

Stock Price

One of the criteria I use to screen stocks in similar industries is enterprise value to EBITDA. I've found that it's a better indicator of value than a low P/E or some other metric. The average EV/EBITDA of four of its peers (two immediately above and below Matrix by market cap) is 5.84 compared to 8.59 for Matrix. At current prices and without Q4 results factored in, you're not buying a bargain. However, this could change. If it hits the high end of its guidance when it announces Q4 results September 12, revenues will be $71 million away from its record-setting performance in 2007. Another strong year in 2012, and it will easily break its previous record. If that happens, and there's no reason to suspect it won't, it's no longer a $13 stock. But here's the best part: Since the beginning of 2006, the number of days its stock has traded below $10 is less than a year. With the business looking up and a history that suggests its downside is limited, the risk here is negligible. (For more on EBITDA, see EBITDA: Challenging The Calculation.)

Bottom Line
Heavy construction isn't a glamorous business; what Matrix does will never be headline news. However, some of the best investors, including Buffett himself, like bland and boring.

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