Matador Resources Co (MTDR): A Balanced Evaluation of Its Market Value
Matador Resources Co (NYSE:MTDR) has recently seen a daily gain of 5.24% and a 3-month gain of 13.7%. With its Earnings Per Share (EPS) (EPS) at 7.66, the question arises: is the stock fairly valued? This article aims to provide a comprehensive analysis of the company's valuation, financial strength, profitability, and growth prospects. We invite readers to delve into this exploration of Matador Resources Co's intrinsic value.
Company Overview
Matador Resources Co is an independent energy company dedicated to the exploration, development, production, and acquisition of oil and natural gas resources. The majority of the company's assets are located in the United States, with a focus on oil and natural gas shale and other unconventional plays. Matador Resources Co also identifies and develops midstream opportunities that support and enhance its exploration and development business. The company often employs advanced formation evaluation, 3-D seismic technology, horizontal drilling, and hydraulic fracturing technology to enhance the development of the basins in which it operates.
At a current price of $58.35 per share and a market cap of $7 billion, the company's stock appears to be fairly valued when compared to its GF Value of $63.94. The following analysis will provide a more in-depth look into this valuation.
GF Value Explained
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, the stock of Matador Resources Co is believed to be fairly valued. This means that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
It is crucial to assess the financial strength of a company before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. A great way to understand the financial strength of a company is to look at its cash-to-debt ratio and interest coverage. Matador Resources Co has a cash-to-debt ratio of 0.01, which is worse than 95.53% of 1029 companies in the Oil & Gas industry. The overall financial strength of Matador Resources Co is 5 out of 10, indicating that the company's financial strength is fair.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Matador Resources Co has been profitable for 7 years over the past 10 years. During the past 12 months, the company had revenues of $2.70 billion and an EPS of $7.66. Its operating margin of 49.46% is better than 90.84% of 982 companies in the Oil & Gas industry. Overall, GuruFocus ranks Matador Resources Co's profitability as strong.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Matador Resources Co is 44.7%, which ranks better than 90.91% of 858 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 54.8%, which ranks better than 85.4% of 822 companies in the Oil & Gas industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Matador Resources Co's ROIC is 20.96 while its WACC came in at 13.28.
Conclusion
In summary, the stock of Matador Resources Co (NYSE:MTDR) is believed to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 85.4% of 822 companies in the Oil & Gas industry. To learn more about Matador Resources Co stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
