Matador Resources: Undervalued, Disciplined, and Poised for Revaluation

Matador Resources (NYSE: MTDR) presents a compelling opportunity at current prices, trading at a significant discount to fair value despite strong fundamentals, disciplined management, and clear near term catalysts.

Valuation Overview

EV/EBITDA is the most appropriate valuation metric for oil and gas E&P firms. Using peer group averages, Matador’s fair value is estimated at $68.30 per share, implying a 59.7% upside. Other valuation methods support this view:

• P/E-based fair value: $76.11

• P/B discount: 18%

• P/S discount: 42%

• EV/S discount: 100%

A Greenblatt-style leverage sensitivity model further highlights upside asymmetry. A 10% increase in enterprise value could drive a 57% share price gain, while a 5% decline in EV would result in only a 13% downside.

Due to the complexity and assumption sensitivity of DCF models in commodity sectors, they were not used. Instead, the focus remained on observable, market-relevant valuation metrics.

Governance & Management

CEO Joseph Wm. Foran holds both Chairman and CEO roles, balanced by a Lead Independent Director. The company operates with a single-class share structure, ensuring equal shareholder rights.

Matador exhibits conservative financial management, prioritising operational efficiency and long term shareholder value over aggressive growth. The company has increased its credit facility but has not fully drawn on it, signalling prudent capital use.

Insider Activity

Insider buying between $39 and $41 (led by the CEO) reflects internal conviction that the stock is undervalued. Insider purchases are often precursors to strong performance and reinforce the credibility of the bull case. It isn't just the CEO either, there has been clustered insider buying among many prominent insiders through late April and May 2025.

What the Market Is Missing

Despite robust margins and free cash flow, Matador remains underappreciated. Liquidity concerns appear overstated, and if oil prices soften as forecasted, Matador’s $400 million authorised buyback could create value by repurchasing shares at depressed prices.

The current valuation does not reflect the company’s steady execution, competent management, shareholder friendliness, strong balance sheet, or upcoming catalysts.

Thesis Timeline & Catalysts

The investment thesis is expected to play out over the next 6 to 12 months, supported by:

• Execution of the buyback programme

• Potential rate cuts improving sector sentiment

• Possible SPR activity offering oil price support

Risks

Key risks include a sharp drop in oil prices, weather-related disruptions, and geopolitical shocks. The thesis would also weaken if buybacks fail to materialise or sentiment shifts abruptly.

Wrapping Up:

At current prices, Matador offers a substantial margin of safety, with expected upside in the 50 to 74 percent range. The stock is rated U50, reflecting this view. With insider conviction, clean governance, and undervaluation across metrics, Matador represents a high-quality, asymmetric investment idea. You can read the full 32 page equity report here.

Professional Disclaimer: This article is intended for informational and educational purposes only. It does not constitute financial advice, investment recommendations, or an offer to buy or sell any security. The author is not authorised by the Financial Conduct Authority (FCA) to provide regulated financial services. The author maintains no position in Matador Resources.