MGY

We rate Magnolia Oil & Gas Corp (MGY) as a Reduce with a composite score of 44.8/100 at a current price of $27.18. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (73th percentile) and value (47th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (29th percentile) and momentum (30th percentile) tempers our overall conviction. We assign a Narrow Moat rating (55/100), Medium uncertainty, and Exemplary capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Magnolia Oil & Gas Corp holds a top-quartile position (#0 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 44.8/100 places it at rank #2839 in our full 7,333-stock universe. At $4.6B in market capitalization, Magnolia Oil & Gas Corp is a mid-cap player in the Mining space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -4% combined with momentum at the 30th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 0% (-43.2pp vs sector) narrow to operating margins of 36% (+23.4pp vs sector) and net margins of 27.9%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $27.18, Magnolia Oil & Gas Corp is trading near fair value based on current fundamentals. Our value factor score of 47/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 13.2x (roughly in line with the sector median of 13.7x), EV/EBITDA of 11.2x (at a premium), P/B of 2.5x, P/S of 3.7x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Magnolia Oil & Gas Corp. The stock presents a balanced risk profile: weak quality scores (29th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: weak quality scores (29th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 73th percentile and quality factor at the 29th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (20% D/E) limits balance sheet risk; above-average stability (73th percentile) suggests predictable business dynamics; a 2.43% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Magnolia Oil & Gas Corp's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 18.6%, disciplined leverage (20% D/E), a 2.43% dividend yield. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — Magnolia Oil & Gas Corp approaches this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 2.43% dividend yield, and the combination of 12.8% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, Magnolia Oil & Gas Corp receives a Reduce rating with a composite score of 44.8/100 (rank #2839 of 7,333). Our quantitative framework assigns a Narrow Moat (55/100, trend: stable), Medium uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 44/100.

Our analysis does not support a constructive view on Magnolia Oil & Gas Corp at this time. The combination of the current quantitative profile, medium uncertainty, and exemplary capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.