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Shareholders in Matador Resources Company (NYSE:MTDR) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. Investor sentiment seems to be improving too, with the share price up 9.4% to US$20.89 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the current consensus from Matador Resources' eight analysts is for revenues of US$1.2b in 2021 which - if met - would reflect a huge 39% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$1.85 per share this year. Previously, the analysts had been modelling revenues of US$1.0b and earnings per share (EPS) of US$1.26 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
It will come as no surprise to learn that the analysts have increased their price target for Matador Resources 10% to US$19.00 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Matador Resources, with the most bullish analyst valuing it at US$28.00 and the most bearish at US$12.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Matador Resources' rate of growth is expected to accelerate meaningfully, with the forecast 39% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 27% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 11% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Matador Resources is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Matador Resources.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Matador Resources going out to 2023, and you can see them free on our platform here..
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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