MTDR

We rate Matador Resources Co (MTDR) as a Reduce with a composite score of 48.9/100 at a current price of $50.49. 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 value (65th percentile) and quality (56th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (24th percentile) and investment (37th percentile) tempers our overall conviction. We assign a Narrow Moat rating (42/100), Medium uncertainty, and Standard 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.

Matador Resources Co 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 48.9/100 places it at rank #2186 in our full 7,333-stock universe. At $5.6B in market capitalization, Matador Resources Co is a mid-cap player in the Mining space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 11%, though momentum at the 24th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 95% (+51.8pp vs sector) narrow to operating margins of 37% (+24.5pp vs sector) and net margins of 24.5%, yielding a gross-to-net conversion rate of 26%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $50.49, Matador Resources Co is trading near fair value based on current fundamentals. Our value factor score of 65/100 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 7.1x (a 48% discount to the sector median of 13.7x), EV/EBITDA of 7.1x (at a premium), P/B of 1.1x, P/S of 1.7x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Matador Resources Co. The stock presents a balanced risk profile: elevated market sensitivity (beta of 1.39). 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: elevated market sensitivity (beta of 1.39). 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 54th percentile and quality factor at the 56th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 95% provide a buffer against cost pressures; a 2.64% 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 Matador Resources Co's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 15.7%, and the balance sheet is managed within acceptable parameters (D/E: 55%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Matador Resources Co falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 2.64% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Matador Resources Co receives a Reduce rating with a composite score of 48.9/100 (rank #2186 of 7,333). Our quantitative framework assigns a Narrow Moat (42/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 47/100.

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