Matador Resources (MTDR) Update - Oct 20

[dan_s]

TipRanks shows that five analysts have updated their reports and price targets for MTDR. The five new reports show price targets that range from $11 to $15 with an average of $12.20.

At the time of this post, MTDR was trading at $8.64.

If you read the Company's September 22 press release you know that Matador's production will ramp up sharply in Q4.

I am increasing my valuation by $0.50 to $14.00 per share.

Matador's production mix in 2021 s/b approximately 57% crude oil and 43% natural gas and NGLs. Rising gas and NGL prices are the primary reasons for my increased valuation. My valuation is only 3X operating cash flow for 2020+2021 divided by 2 times 3. If Matador can convince me that they will fund all future growth with cash flow from operations, my valuation multiple should go up. If annual production growth can be generated with cash flow from operations the multiple should move up to 4X operating CFPS. The Company has a lot of running room in West Texas.

My forecast for 2021 shows $1.26 EPS and $5.46 operating cash flow per share, which compares to today's First Call estimates for 2021 of $0.69 EPS and $4.55 operating CFPS. Note that more than half of the 16 estimates included in the First Call estimates are dated before September and are based on much lower natural gas and NGL prices than we have today.

This one has a lot of upside if they can get spending under control and live within cash flow. They promised that they would on Sept 22.

My forecast/valuation model will be posted to the EPG website late today.