Intrinsic value of Matador Resources - MTDR

Previous Close

$23.73

  Intrinsic Value

$1.77

stock screener

  Rating & Target

str. sell

-93%

  Value-price divergence*

-93%

Previous close

$23.73

 
Intrinsic value

$1.77

 
Up/down potential

-93%

 
Rating

str. sell

 
Value-price divergence*

-93%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MTDR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.81
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  255
  408
  630
  943
  1,368
  1,930
  2,653
  3,561
  4,676
  6,017
  7,600
  9,437
  11,538
  13,907
  16,547
  19,456
  22,632
  26,070
  29,765
  33,710
  37,900
  42,329
  46,993
  51,888
  57,012
  62,364
  67,944
  73,756
  79,803
  86,090
  92,625
Variable operating expenses, $m
 
  1,774
  2,741
  4,100
  5,949
  8,393
  11,538
  15,487
  20,336
  26,167
  33,051
  41,042
  50,178
  60,482
  71,961
  84,614
  98,426
  113,378
  129,447
  146,605
  164,828
  184,091
  204,374
  225,662
  247,945
  271,220
  295,490
  320,765
  347,063
  374,406
  402,825
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  432
  1,774
  2,741
  4,100
  5,949
  8,393
  11,538
  15,487
  20,336
  26,167
  33,051
  41,042
  50,178
  60,482
  71,961
  84,614
  98,426
  113,378
  129,447
  146,605
  164,828
  184,091
  204,374
  225,662
  247,945
  271,220
  295,490
  320,765
  347,063
  374,406
  402,825
Operating income, $m
  -177
  -1,366
  -2,111
  -3,157
  -4,581
  -6,463
  -8,885
  -11,926
  -15,660
  -20,150
  -25,452
  -31,605
  -38,640
  -46,575
  -55,415
  -65,158
  -75,794
  -87,308
  -99,682
  -112,895
  -126,928
  -141,761
  -157,381
  -173,774
  -190,933
  -208,857
  -227,546
  -247,009
  -267,260
  -288,316
  -310,200
EBITDA, $m
  -55
  -1,191
  -1,840
  -2,751
  -3,992
  -5,632
  -7,742
  -10,392
  -13,645
  -17,558
  -22,178
  -27,540
  -33,670
  -40,583
  -48,286
  -56,776
  -66,044
  -76,077
  -86,859
  -98,373
  -110,600
  -123,526
  -137,136
  -151,420
  -166,373
  -181,990
  -198,275
  -215,235
  -232,881
  -251,228
  -270,298
Interest expense (income), $m
  27
  32
  58
  96
  148
  220
  315
  438
  591
  780
  1,006
  1,274
  1,585
  1,940
  2,341
  2,787
  3,279
  3,816
  4,397
  5,022
  5,689
  6,398
  7,147
  7,935
  8,763
  9,630
  10,535
  11,478
  12,461
  13,483
  14,547
Earnings before tax, $m
  -98
  -1,399
  -2,169
  -3,253
  -4,729
  -6,683
  -9,200
  -12,364
  -16,251
  -20,930
  -26,458
  -32,879
  -40,225
  -48,515
  -57,755
  -67,945
  -79,073
  -91,124
  -104,079
  -117,917
  -132,617
  -148,159
  -164,527
  -181,709
  -199,697
  -218,486
  -238,081
  -258,488
  -279,721
  -301,799
  -324,747
Tax expense, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -97
  -1,399
  -2,169
  -3,253
  -4,729
  -6,683
  -9,200
  -12,364
  -16,251
  -20,930
  -26,458
  -32,879
  -40,225
  -48,515
  -57,755
  -67,945
  -79,073
  -91,124
  -104,079
  -117,917
  -132,617
  -148,159
  -164,527
  -181,709
  -199,697
  -218,486
  -238,081
  -258,488
  -279,721
  -301,799
  -324,747

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  213
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,465
  2,000
  3,090
  4,621
  6,705
  9,460
  13,005
  17,456
  22,921
  29,494
  37,254
  46,261
  56,558
  68,172
  81,111
  95,372
  110,940
  127,794
  145,906
  165,246
  185,785
  207,497
  230,359
  254,354
  279,471
  305,705
  333,061
  361,550
  391,190
  422,010
  454,043
Adjusted assets (=assets-cash), $m
  1,252
  2,000
  3,090
  4,621
  6,705
  9,460
  13,005
  17,456
  22,921
  29,494
  37,254
  46,261
  56,558
  68,172
  81,111
  95,372
  110,940
  127,794
  145,906
  165,246
  185,785
  207,497
  230,359
  254,354
  279,471
  305,705
  333,061
  361,550
  391,190
  422,010
  454,043
Revenue / Adjusted assets
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
Average production assets, $m
  1,099
  1,758
  2,716
  4,061
  5,893
  8,314
  11,429
  15,341
  20,144
  25,921
  32,740
  40,655
  49,705
  59,911
  71,283
  83,816
  97,498
  112,309
  128,226
  145,223
  163,274
  182,355
  202,447
  223,535
  245,608
  268,663
  292,705
  317,741
  343,791
  370,876
  399,027
Working capital, $m
  109
  -41
  -63
  -94
  -137
  -193
  -265
  -356
  -468
  -602
  -760
  -944
  -1,154
  -1,391
  -1,655
  -1,946
  -2,263
  -2,607
  -2,976
  -3,371
  -3,790
  -4,233
  -4,699
  -5,189
  -5,701
  -6,236
  -6,794
  -7,376
  -7,980
  -8,609
  -9,262
Total debt, $m
  578
  1,035
  1,706
  2,650
  3,933
  5,630
  7,814
  10,556
  13,923
  17,972
  22,751
  28,300
  34,643
  41,797
  49,767
  58,552
  68,142
  78,524
  89,681
  101,594
  114,247
  127,621
  141,704
  156,485
  171,957
  188,117
  204,969
  222,518
  240,776
  259,761
  279,493
Total liabilities, $m
  775
  1,232
  1,903
  2,847
  4,130
  5,827
  8,011
  10,753
  14,120
  18,169
  22,948
  28,497
  34,840
  41,994
  49,964
  58,749
  68,339
  78,721
  89,878
  101,791
  114,444
  127,818
  141,901
  156,682
  172,154
  188,314
  205,166
  222,715
  240,973
  259,958
  279,690
Total equity, $m
  690
  768
  1,187
  1,775
  2,575
  3,633
  4,994
  6,703
  8,802
  11,326
  14,305
  17,764
  21,718
  26,178
  31,147
  36,623
  42,601
  49,073
  56,028
  63,454
  71,341
  79,679
  88,458
  97,672
  107,317
  117,391
  127,895
  138,835
  150,217
  162,052
  174,352
Total liabilities and equity, $m
  1,465
  2,000
  3,090
  4,622
  6,705
  9,460
  13,005
  17,456
  22,922
  29,495
  37,253
  46,261
  56,558
  68,172
  81,111
  95,372
  110,940
  127,794
  145,906
  165,245
  185,785
  207,497
  230,359
  254,354
  279,471
  305,705
  333,061
  361,550
  391,190
  422,010
  454,042
Debt-to-equity ratio
  0.838
  1.350
  1.440
  1.490
  1.530
  1.550
  1.560
  1.570
  1.580
  1.590
  1.590
  1.590
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
  1.600
Adjusted equity ratio
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -97
  -1,399
  -2,169
  -3,253
  -4,729
  -6,683
  -9,200
  -12,364
  -16,251
  -20,930
  -26,458
  -32,879
  -40,225
  -48,515
  -57,755
  -67,945
  -79,073
  -91,124
  -104,079
  -117,917
  -132,617
  -148,159
  -164,527
  -181,709
  -199,697
  -218,486
  -238,081
  -258,488
  -279,721
  -301,799
  -324,747
Depreciation, amort., depletion, $m
  122
  176
  272
  406
  589
  831
  1,143
  1,534
  2,014
  2,592
  3,274
  4,066
  4,971
  5,991
  7,128
  8,382
  9,750
  11,231
  12,823
  14,522
  16,327
  18,236
  20,245
  22,353
  24,561
  26,866
  29,270
  31,774
  34,379
  37,088
  39,903
Funds from operations, $m
  136
  -1,223
  -1,897
  -2,847
  -4,140
  -5,852
  -8,057
  -10,830
  -14,237
  -18,338
  -23,184
  -28,814
  -35,255
  -42,523
  -50,627
  -59,563
  -69,323
  -79,893
  -91,257
  -103,395
  -116,290
  -129,924
  -144,283
  -159,356
  -175,136
  -191,620
  -208,810
  -226,713
  -245,342
  -264,711
  -284,844
Change in working capital, $m
  2
  -15
  -22
  -31
  -43
  -56
  -72
  -91
  -111
  -134
  -158
  -184
  -210
  -237
  -264
  -291
  -318
  -344
  -369
  -395
  -419
  -443
  -466
  -489
  -512
  -535
  -558
  -581
  -605
  -629
  -653
Cash from operations, $m
  134
  -1,207
  -1,875
  -2,815
  -4,097
  -5,796
  -7,985
  -10,739
  -14,125
  -18,204
  -23,026
  -28,630
  -35,045
  -42,287
  -50,363
  -59,272
  -69,006
  -79,550
  -90,887
  -103,000
  -115,871
  -129,481
  -143,816
  -158,866
  -174,623
  -191,085
  -208,252
  -226,132
  -244,737
  -264,083
  -284,191
Maintenance CAPEX, $m
  0
  -110
  -176
  -272
  -406
  -589
  -831
  -1,143
  -1,534
  -2,014
  -2,592
  -3,274
  -4,066
  -4,971
  -5,991
  -7,128
  -8,382
  -9,750
  -11,231
  -12,823
  -14,522
  -16,327
  -18,236
  -20,245
  -22,353
  -24,561
  -26,866
  -29,270
  -31,774
  -34,379
  -37,088
New CAPEX, $m
  -454
  -659
  -958
  -1,346
  -1,831
  -2,421
  -3,116
  -3,912
  -4,803
  -5,776
  -6,819
  -7,916
  -9,050
  -10,206
  -11,371
  -12,533
  -13,682
  -14,812
  -15,917
  -16,997
  -18,051
  -19,081
  -20,092
  -21,087
  -22,073
  -23,056
  -24,041
  -25,037
  -26,049
  -27,085
  -28,152
Cash from investing activities, $m
  -406
  -769
  -1,134
  -1,618
  -2,237
  -3,010
  -3,947
  -5,055
  -6,337
  -7,790
  -9,411
  -11,190
  -13,116
  -15,177
  -17,362
  -19,661
  -22,064
  -24,562
  -27,148
  -29,820
  -32,573
  -35,408
  -38,328
  -41,332
  -44,426
  -47,617
  -50,907
  -54,307
  -57,823
  -61,464
  -65,240
Free cash flow, $m
  -272
  -1,976
  -3,009
  -4,432
  -6,335
  -8,806
  -11,932
  -15,794
  -20,462
  -25,995
  -32,437
  -39,820
  -48,160
  -57,463
  -67,725
  -78,934
  -91,069
  -104,111
  -118,035
  -132,820
  -148,444
  -164,889
  -182,144
  -200,198
  -219,050
  -238,701
  -259,160
  -280,439
  -302,560
  -325,547
  -349,430
Issuance/(repayment) of debt, $m
  185
  461
  671
  943
  1,284
  1,697
  2,184
  2,742
  3,366
  4,049
  4,780
  5,548
  6,343
  7,154
  7,971
  8,785
  9,590
  10,382
  11,157
  11,913
  12,652
  13,375
  14,083
  14,781
  15,472
  16,160
  16,851
  17,549
  18,259
  18,985
  19,732
Issuance/(repurchase) of shares, $m
  289
  1,686
  2,588
  3,841
  5,529
  7,741
  10,562
  14,073
  18,350
  23,454
  29,438
  36,338
  44,179
  52,974
  62,724
  73,421
  85,051
  97,596
  111,034
  125,344
  140,504
  156,497
  173,307
  190,923
  209,341
  228,560
  248,585
  269,427
  291,103
  313,634
  337,048
Cash from financing (excl. dividends), $m  
  468
  2,147
  3,259
  4,784
  6,813
  9,438
  12,746
  16,815
  21,716
  27,503
  34,218
  41,886
  50,522
  60,128
  70,695
  82,206
  94,641
  107,978
  122,191
  137,257
  153,156
  169,872
  187,390
  205,704
  224,813
  244,720
  265,436
  286,976
  309,362
  332,619
  356,780
Total cash flow (excl. dividends), $m
  196
  170
  250
  351
  478
  632
  813
  1,021
  1,254
  1,508
  1,780
  2,067
  2,363
  2,665
  2,969
  3,272
  3,572
  3,867
  4,156
  4,438
  4,713
  4,982
  5,246
  5,506
  5,763
  6,020
  6,277
  6,537
  6,801
  7,072
  7,350
Retained Cash Flow (-), $m
  -202
  -1,686
  -2,588
  -3,841
  -5,529
  -7,741
  -10,562
  -14,073
  -18,350
  -23,454
  -29,438
  -36,338
  -44,179
  -52,974
  -62,724
  -73,421
  -85,051
  -97,596
  -111,034
  -125,344
  -140,504
  -156,497
  -173,307
  -190,923
  -209,341
  -228,560
  -248,585
  -269,427
  -291,103
  -313,634
  -337,048
Prev. year cash balance distribution, $m
 
  209
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -1,306
  -2,337
  -3,489
  -5,051
  -7,109
  -9,748
  -13,052
  -17,096
  -21,946
  -27,657
  -34,271
  -41,817
  -50,309
  -59,755
  -70,149
  -81,479
  -93,729
  -106,879
  -120,906
  -135,791
  -151,515
  -168,061
  -185,418
  -203,578
  -222,541
  -242,308
  -262,890
  -284,302
  -306,562
  -329,698
Discount rate, %
 
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for distribution, $m
 
  -1,238
  -2,089
  -2,924
  -3,946
  -5,144
  -6,488
  -7,934
  -9,417
  -10,864
  -12,196
  -13,336
  -14,217
  -14,786
  -15,011
  -14,882
  -14,413
  -13,639
  -12,612
  -11,395
  -10,058
  -8,672
  -7,300
  -5,997
  -4,806
  -3,754
  -2,856
  -2,115
  -1,523
  -1,065
  -723
Current shareholders' claim on cash, %
  100
  49.0
  24.4
  12.5
  6.5
  3.4
  1.8
  1.0
  0.5
  0.3
  0.2
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Matador Resources Company, an independent energy company, engages in the exploration, development, production, and acquisition of oil and natural gas resources in the United States. The company primarily holds interests in the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas; the Eagle Ford shale play in South Texas; and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. As of December 31, 2015, its estimated proved oil and natural gas reserves were 85.1 million barrels of oil equivalent, including 45.6 million stock tank barrels of oil and 236.9 billion cubic feet of natural gas. The company was formerly known as Matador Holdco, Inc. and changed its name to Matador Resources Company in August 2011. Matador Resources Company was founded in 2003 and is headquartered in Dallas, Texas.

FINANCIAL RATIOS  of  Matador Resources (MTDR)

Valuation Ratios
P/E Ratio -24.3
Price to Sales 9.3
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow -7.4
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.7%
Cap. Spend. - 3 Yr. Gr. Rate 4.3%
Financial Strength
Quick Ratio 53
Current Ratio 0
LT Debt to Equity 83.2%
Total Debt to Equity 83.8%
Interest Coverage -3
Management Effectiveness
Return On Assets -5.4%
Ret/ On Assets - 3 Yr. Avg. -15.8%
Return On Total Capital -9%
Ret/ On T. Cap. - 3 Yr. Avg. -21%
Return On Equity -16.5%
Return On Equity - 3 Yr. Avg. -33.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 59.2%
Gross Margin - 3 Yr. Avg. 66.8%
EBITDA Margin 20%
EBITDA Margin - 3 Yr. Avg. -56.1%
Operating Margin -69.4%
Oper. Margin - 3 Yr. Avg. -120.7%
Pre-Tax Margin -38.4%
Pre-Tax Margin - 3 Yr. Avg. -113.5%
Net Profit Margin -38%
Net Profit Margin - 3 Yr. Avg. -98%
Effective Tax Rate 1%
Eff/ Tax Rate - 3 Yr. Avg. 18.5%
Payout Ratio 0%

MTDR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTDR stock intrinsic value calculation we used $255 million for the last fiscal year's total revenue generated by Matador Resources. The default revenue input number comes from 2016 income statement of Matador Resources. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MTDR stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.5%, whose default value for MTDR is calculated based on our internal credit rating of Matador Resources, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Matador Resources.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MTDR stock the variable cost ratio is equal to 434.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MTDR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Matador Resources.

Corporate tax rate of 27% is the nominal tax rate for Matador Resources. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MTDR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MTDR are equal to 430.8%.

Life of production assets of 10 years is the average useful life of capital assets used in Matador Resources operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MTDR is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $690 million for Matador Resources - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 97.717 million for Matador Resources is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Matador Resources at the current share price and the inputted number of shares is $2.3 billion.

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COMPANY NEWS

▶ Matador meets 2Q profit forecasts   [Aug-02-17 10:43PM  Associated Press]
▶ US Gasoline Demand Falls for 2nd Time in 5 Weeks   [Jul-26-17 08:35AM  Market Realist]
▶ Will Saudi Arabias Crude Oil Export Plans Rescue Oil Prices?   [Jul-19-17 09:26AM  Market Realist]
▶ Cushing Inventories: Lowest Level since November 2016   [Jul-10-17 01:21PM  Market Realist]
▶ US Gasoline Inventories Could Help Crude Oil Bulls   [Jun-22-17 11:13AM  Market Realist]
▶ US Gasoline Consumption Rose in May   [Jun-07-17 12:35PM  Market Realist]
▶ Libyas Crude Oil Production: Boon or Bane for Oil Bulls?   [May-31-17 10:05AM  Market Realist]
▶ Matador Resources Set to Join S&P MidCap 400   [May-25-17 05:45PM  PR Newswire]
▶ Will Crude Oil Futures Rise after OPECs Meeting?   [May-22-17 08:31AM  Market Realist]
▶ US Refinery Demand Fell from an All-Time High   [May-04-17 09:01AM  Market Realist]
▶ Matador tops Street 1Q forecasts   [May-03-17 07:09PM  Associated Press]
▶ Cushing Crude Oil Inventories Hit an All-Time High   [Apr-17-17 08:41AM  Market Realist]
▶ How US Distillate Inventories Affect Diesel and Oil Prices   [Apr-13-17 12:05PM  Market Realist]
▶ US Distillate Inventories Fell for the Fifth Straight Week   [Mar-16-17 07:35AM  Market Realist]
▶ US Crude Oil Production: Highest Level since March 2016   [Mar-02-17 09:10AM  Market Realist]
▶ Houston PE firm forms JV with Dallas energy co.   [09:20AM  at bizjournals.com]
▶ [$$] Five Point, Matador Resources Form Midstream Venture   [Feb-17-17 06:47PM  at The Wall Street Journal]
▶ Matador Resources Company Announces Mallon Well Results   [Feb-02-17 09:07PM  Business Wire]
▶ Junk energy borrowers storm market   [01:57PM  Reuters]
Stock chart of MTDR Financial statements of MTDR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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