Matrix Service: Construction for the petroleum and power industries

Whether they need a heat recovery steam generator stack erection, a gas plant relocation, or a petroleum terminal upgrade, many heavy industry decision makers turn to a Tulsa, Oklahoma outfit for help.

Matrix Service Company (NASDAQ: MTRX) provides construction, repair and maintenance services, primarily to the petroleum and power sectors in the United States and Canada. The construction services segment designs and builds plants, refineries and aboveground storage tanks. The repair and maintenance unit offers preventive, routine, and emergency repair services, specializing in turnarounds, outages, and shutdowns. The company operates from offices in Oklahoma, Texas, California, Washington, Illinois, Michigan, Pennsylvania, Delaware and Ontario. Clients include BP plc (NYSE: BP), Chevron (NYSE: CVX) and FedEx (NYSE: FDX).

The firm pleased investors last week, when it reported Q3 EPS of 24 cents and revenues of $168.7 million. Analysts had been expecting 17 cents and $136.5 million. Management also guided FY07 revenues to $630-640 million, versus consensus of $588.92.

MTRX shares popped on the news and have since been defining a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "holds". Analysts see a seventeen percent growth rate, through the next year. The MTRX Price to Sales ratio (1.03), Sales Growth rate (41.05%), EPS Growth rate (166.67%), Return on Assets (10.37%), Return on Investment (17.64%) and Return on Equity (23.06%) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $10.26 and $26.00. A stop-loss of $21.90 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.