Over the past six months, Matador Resources’s shares (currently trading at $52.49) have posted a disappointing 14% loss, well below the S&P 500’s 16.9% gain. This might have investors contemplating their next move.

Following the pullback, is now an opportune time to buy MTDR? Find out in our full research report, it’s free.

Why Are We Positive on MTDR?

Operating primarily in the Delaware Basin where multiple oil-bearing layers lie stacked thousands of feet deep, Matador Resources (NYSE: MTDR) explores for, drills, and produces oil and natural gas from underground rock formations in New Mexico and Texas.

1. Skyrocketing Revenue Shows Strong Momentum

Cyclical sectors like Energy often flatter weaker operators during favorable price environments, but a longer-term lens separates those from businesses that can consistently perform across market cycles. Thankfully, Matador Resources’s 28.5% annualized revenue growth over the last five years was incredible. Its growth beat the average energy upstream and integrated energy company and shows its offerings resonate with customers.

2. Elite Gross Margin Powers Best-In-Class Business Model

In a single quarter or year, gross margins in the sector can swing wildly due to commodity prices, hedging, or changes in labor costs. Over a multi-year period across different points in the cycle, gross margin differences can signal whether a company is a structurally-advantaged producer (“rock” quality, takeaway, operating costs) or not.

Matador Resources, which averaged 82.3% gross margin over the last five years, exhibits enviable unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an advantaged starting point for ultimate operating profits and free cash flow generation.

3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Matador Resources has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the energy upstream and integrated energy sector, averaging 24.8% over the last five years.

Final Judgment

These are just a few reasons Matador Resources is a high-quality business worth owning. After the recent drawdown, the stock trades at 6.1× forward P/E (or $52.49 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than Matador Resources

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