Matrix Initiatives, Inc.

Matrix Initiatives Inc. (MTXX - Snapshot Report) is cashing in on over-the-counter cough and cold products as revenue rose 26% in the fiscal third quarter. The company has surprised on estimates 4 consecutive quarters by an average of 28.48%. MTXX has a PEG ratio of only 0.9.

Company Description

Matrix Initiatives manufactures over-the-counter healthcare products that use unique drug delivery systems. The company's wholly-owned subsidiary, Zicam LLC, sells Zicam and Nasal Comfort products in the cough and cold segment and Xcid antacid in the digestive health category.

Matrix's premiere product is the Zicam Cold Remedy nasal gel, which the company says has been clinically proven to reduce the duration and severity of the common cold.

Revenue Jumped 26% in the Third Quarter 2009

On Jan 26, the company reported third quarter earnings that beat Wall Street estimates by 61.29%, or 19 cents. Net income was $4.8 million, or 50 cents per share, compared to a loss of $635,000, or 7 cents per share, in the year ago period. Analysts expected 31 cents.

Revenue rose 26% to $38.7 million from $30.8 million in the fiscal third quarter of 2008. Growth was driven by higher sales of Cold Remedy swabs and the company's new Allergy swab product, price increases and lower product return charges compared to the prior year.

Gross margin also increased for the quarter to 71% compared to 64% in the year ago period. Matrix expects the full year gross margin to be no less than 69%.

Fiscal 2009 Guidance

The company confirmed earlier guidance for fiscal 2009 revenue as 5% to 10% above the $101 million achieved in fiscal 2008, barring any changes to predictions about the cold season or economic environment. Net income is forecasted to increase 20% to 30% from 2008 to the range of $12.5 million to $13.6 million.

2009 and 2010 Consensus Estimates Rise

Given the company's confirmation of 2009 guidance, 2009 estimates have been holding steady at $1.39 per share, up 4 cents in the last 60 days.

Analysts expect 14.70% year over year earnings growth in 2010 as consensus estimates have risen 5 cents to $1.60 from $1.55 in the last 2 months.

Value Fundamentals

Matrix Initiatives is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 10.5. Its price-to-book is 2.22. The company has a solid 5-year average return on equity (ROE) of 12.97%.