Why Matador Resources Isn't Following The Oil Rally?
A gas flare burns at a Matador Resources Co. site in the Permian Basin area of Loving County, Texas, ... More U.S., on Saturday, Dec. 15, 2018. Photographer: Angus Mordant/Bloomberg
Despite a robust 23% annual sales growth and strong net margins of 25%, Matador Resources stock (NYSE: MTDR) has traded largely flat over the past three years. What accounts for the gap between solid business performance and stagnant stock returns, and could this present a potential buying opportunity?
Several elements have contributed to investor caution regarding Matador. The company's operations are highly concentrated in the Delaware Basin, making it vulnerable to geographic risk. Moreover, as an energy company, Matador is subject to the sector's cyclical nature and geopolitical volatility.
Financial concerns also weigh on sentiment. The company carries significant debt of roughly $3.4 billion, while holding less than $25 million in cash. Recent market trends have compounded pressure, with crude oil prices dropping more than 20% since peaking in mid-January 2025 following tariff-related developments. For investors seeking growth with less single-stock risk, the High-Quality portfolio offers a compelling alternative, with returns exceeding 91% since inception, outperforming the S&P 500.
Despite these headwinds, the investment case for Matador remains strong. It is an undervalued, efficiently run U.S. shale producer generating healthy free cash flow and positioned to benefit from rising global energy demand. The market appears to be underestimating the stock due to short-term concerns around capital spending and broader economic uncertainty.
Relative to peers like APA, CHRD, DVN, and MGY, Matador trades at a notable discount. MGY, for instance, has a price-to-earnings ratio above 10 with 7% annual revenue growth and 27% net margins, while MTDR trades at just 5 times earnings despite stronger 23% sales growth and similar 25% margins.
Potential upside catalysts include pro-fossil fuel policies under the Trump administration that could reduce regulatory friction and support growth. On the technical side, MTDR currently trades near the low end of its historical range, with analysts setting average price targets around $72—nearly 90% above the current $38 level.
Concerned about MTDR's volatility? The Trefis High Quality Portfolio, comprised of 30 stocks, has consistently outperformed the S&P 500 over the past four years. What's the secret? These companies, as a group, deliver superior returns with reduced volatility compared to the broader market, as seen in the HQ Portfolio performance metrics.
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