Legacy Paper Markets Will Decline Amid Regulatory And Digital Shifts

Key Takeaways

• Regulatory shifts and digitalization are reducing demand for Mativ's core paper products, leading to declining revenues and growth challenges.
  
• High debt, concentrated customer base, and rising competition threaten profitability, with limited capacity for innovation and increasing margin pressure.
  
• Operational improvements, strategic portfolio actions, and expanding high-performance product lines are positioning Mativ for stronger profitability, reduced risk, and sustained long-term growth.

Catalysts

Manufactures and sells specialty materials in the United States, Europe, the Asia Pacific, the Americas, and internationally.

• Intensifying global legislation and consumer backlash against synthetic and single-use materials are likely to undercut demand for Mativ's engineered and specialty paper products, leading to ongoing revenue attrition in its legacy segments and constraining overall top-line growth.
  
• Rapid digitalization and increasing adoption of virtual documentation will continue to erode the demand for traditional specialty papers, aggravating volume declines and putting additional downward pressure on revenue as these markets structurally shrink.
  
• Persistent customer concentration, particularly in legacy tobacco and industrial markets, exposes Mativ to sudden order reductions or loss of major clients, increasing the likelihood of sharp revenue volatility and further margin compression over the long term.
  
• The company's significant debt burden post-merger and limited operating scale could limit its ability to sustain investment in research and development, with rising interest expenses crowding out earnings and undermining long-term free cash flow even as cost-cutting initiatives plateau.
  
• Intensifying global competition-especially from low-cost producers in emerging markets and increased vertical integration by multinational clients-will create severe pricing pressures and threaten Mativ's ability to maintain gross margins, which could result in deteriorating profitability and diminished earnings power over time.

Mativ Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Mativ Holdings compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Mativ Holdings's revenue will grow by 2.2% annually over the next 3 years.
• The bearish analysts are not forecasting that Mativ Holdings will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Mativ Holdings's profit margin will increase from -23.1% to the average US Chemicals industry of 9.5% in 3 years.
• If Mativ Holdings's profit margin were to converge on the industry average, you could expect earnings to reach $198.4 million (and earnings per share of $3.61) by about August 2028, up from $-454.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 4.5x on those 2028 earnings, up from -1.5x today. This future PE is lower than the current PE for the US Chemicals industry at 27.0x.
• Analysts expect the number of shares outstanding to grow by 0.62% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.81%, as per the Simply Wall St company report.

Mativ Holdings Future Earnings Per Share Growth

Risks

• Mativ is successfully executing a comprehensive turnaround and cost reduction plan, targeting $35 to $40 million in savings by year-end 2026, with $15 to $20 million realized in 2025, which is likely to strengthen net earnings and drive margin expansion over the coming years.
  
• Sustained organic sales growth and market share gains in key categories such as tapes, labels, health care, commercial print, and filtration (including double-digit growth in HVAC and air pollution control), indicates that long-term secular demand is translating into revenue and adjusted EBITDA growth for Mativ.
  
• The renewed operational discipline, improved supply chain efficiency, and organizational delayering are enabling faster decision-making, higher employee engagement, and better on-time service, all pointing to structural improvements in profitability and cost control that support stronger future net margins.
  
• Strategic review of the company's portfolio, combined with deleveraging efforts and disciplined capital allocation (including reduced capex and inventory), are increasing free cash flow and lowering net debt, which could result in enhanced shareholder value and a lower risk profile in the long term.
  
• Growth in high-potential product lines like optical films and paint protection, buoyed by winning back premium segment customers and new long-term contracts, is aligning Mativ with industry-wide trends toward advanced, high-performance specialty materials, which should drive sustained revenue growth and improved operating margins.

Valuation

• The assumed bearish price target for Mativ Holdings is $12.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mativ Holdings's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.0, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $198.4 million, and it would be trading on a PE ratio of 4.5x, assuming you use a discount rate of 10.8%.
  
• Given the current share price of $12.28, the bearish analyst price target of $12.0 is 2.3% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.