Intrinsic value of Matador Resources - MTDR

Previous Close

$31.98

  Intrinsic Value

$3.08

stock screener

  Rating & Target

str. sell

-90%

Previous close

$31.98

 
Intrinsic value

$3.08

 
Up/down potential

-90%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  870
  1,345
  2,011
  2,918
  4,117
  5,660
  7,597
  9,975
  12,836
  16,213
  20,133
  24,614
  29,668
  35,299
  41,506
  48,281
  55,616
  63,498
  71,915
  80,854
  90,303
  100,252
  110,695
  121,626
  133,043
  144,948
  157,346
  170,246
  183,659
  197,599
Variable operating expenses, $m
 
  1,454
  2,246
  3,359
  4,873
  6,875
  9,452
  12,687
  16,659
  21,436
  27,075
  33,622
  41,106
  49,546
  58,950
  69,315
  80,630
  92,879
  106,042
  120,098
  135,026
  150,806
  167,422
  184,861
  203,115
  222,182
  242,063
  262,769
  284,311
  306,710
  329,991
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
  1,454
  2,246
  3,359
  4,873
  6,875
  9,452
  12,687
  16,659
  21,436
  27,075
  33,622
  41,106
  49,546
  58,950
  69,315
  80,630
  92,879
  106,042
  120,098
  135,026
  150,806
  167,422
  184,861
  203,115
  222,182
  242,063
  262,769
  284,311
  306,710
  329,991
Operating income, $m
  -177
  -583
  -901
  -1,347
  -1,955
  -2,758
  -3,792
  -5,090
  -6,684
  -8,600
  -10,863
  -13,489
  -16,491
  -19,878
  -23,651
  -27,809
  -32,348
  -37,263
  -42,544
  -48,183
  -54,172
  -60,503
  -67,169
  -74,166
  -81,489
  -89,139
  -97,115
  -105,422
  -114,065
  -123,051
  -132,392
EBITDA, $m
  -55
  -338
  -522
  -781
  -1,133
  -1,599
  -2,198
  -2,950
  -3,873
  -4,984
  -6,295
  -7,818
  -9,558
  -11,520
  -13,707
  -16,117
  -18,748
  -21,596
  -24,656
  -27,925
  -31,395
  -35,065
  -38,928
  -42,983
  -47,227
  -51,661
  -56,283
  -61,098
  -66,107
  -71,315
  -76,728
Interest expense (income), $m
  27
  34
  65
  110
  173
  259
  372
  518
  701
  926
  1,196
  1,515
  1,886
  2,310
  2,787
  3,320
  3,907
  4,547
  5,240
  5,986
  6,781
  7,626
  8,520
  9,460
  10,447
  11,481
  12,560
  13,685
  14,858
  16,077
  17,345
Earnings before tax, $m
  -98
  -617
  -966
  -1,457
  -2,128
  -3,017
  -4,164
  -5,608
  -7,384
  -9,526
  -12,059
  -15,004
  -18,377
  -22,187
  -26,438
  -31,129
  -36,255
  -41,810
  -47,784
  -54,169
  -60,953
  -68,129
  -75,689
  -83,626
  -91,937
  -100,619
  -109,675
  -119,108
  -128,922
  -139,128
  -149,737
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
  -617
  -966
  -1,457
  -2,128
  -3,017
  -4,164
  -5,608
  -7,384
  -9,526
  -12,059
  -15,004
  -18,377
  -22,187
  -26,438
  -31,129
  -36,255
  -41,810
  -47,784
  -54,169
  -60,953
  -68,129
  -75,689
  -83,626
  -91,937
  -100,619
  -109,675
  -119,108
  -128,922
  -139,128
  -149,737

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
  3,427
  5,294
  7,918
  11,488
  16,208
  22,283
  29,910
  39,273
  50,535
  63,830
  79,262
  96,906
  116,804
  138,974
  163,409
  190,084
  218,960
  249,993
  283,130
  318,322
  355,523
  394,695
  435,807
  478,841
  523,791
  570,662
  619,474
  670,260
  723,066
  777,951
Adjusted assets (=assets-cash), $m
  1,252
  3,427
  5,294
  7,918
  11,488
  16,208
  22,283
  29,910
  39,273
  50,535
  63,830
  79,262
  96,906
  116,804
  138,974
  163,409
  190,084
  218,960
  249,993
  283,130
  318,322
  355,523
  394,695
  435,807
  478,841
  523,791
  570,662
  619,474
  670,260
  723,066
  777,951
Revenue / Adjusted assets
  0.204
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
Average production assets, $m
  1,099
  2,452
  3,788
  5,665
  8,220
  11,597
  15,944
  21,401
  28,101
  36,159
  45,672
  56,714
  69,338
  83,576
  99,438
  116,922
  136,008
  156,670
  178,874
  202,584
  227,765
  254,383
  282,411
  311,828
  342,620
  374,782
  408,319
  443,245
  479,583
  517,367
  556,638
Working capital, $m
  109
  -136
  -210
  -314
  -455
  -642
  -883
  -1,185
  -1,556
  -2,002
  -2,529
  -3,141
  -3,840
  -4,628
  -5,507
  -6,475
  -7,532
  -8,676
  -9,906
  -11,219
  -12,613
  -14,087
  -15,639
  -17,268
  -18,974
  -20,755
  -22,612
  -24,546
  -26,558
  -28,651
  -30,826
Total debt, $m
  574
  1,121
  1,895
  2,981
  4,459
  6,413
  8,928
  12,085
  15,962
  20,624
  26,128
  32,517
  39,822
  48,060
  57,238
  67,354
  78,397
  90,352
  103,200
  116,918
  131,488
  146,889
  163,106
  180,127
  197,943
  216,552
  235,957
  256,165
  277,190
  299,052
  321,774
Total liabilities, $m
  775
  1,419
  2,192
  3,278
  4,756
  6,710
  9,225
  12,383
  16,259
  20,922
  26,426
  32,815
  40,119
  48,357
  57,535
  67,651
  78,695
  90,650
  103,497
  117,216
  131,785
  147,187
  163,404
  180,424
  198,240
  216,849
  236,254
  256,462
  277,488
  299,349
  322,072
Total equity, $m
  690
  2,008
  3,102
  4,640
  6,732
  9,498
  13,058
  17,527
  23,014
  29,614
  37,404
  46,448
  56,787
  68,447
  81,439
  95,758
  111,389
  128,311
  146,496
  165,914
  186,536
  208,336
  231,291
  255,383
  280,601
  306,941
  334,408
  363,012
  392,772
  423,717
  455,879
Total liabilities and equity, $m
  1,465
  3,427
  5,294
  7,918
  11,488
  16,208
  22,283
  29,910
  39,273
  50,536
  63,830
  79,263
  96,906
  116,804
  138,974
  163,409
  190,084
  218,961
  249,993
  283,130
  318,321
  355,523
  394,695
  435,807
  478,841
  523,790
  570,662
  619,474
  670,260
  723,066
  777,951
Debt-to-equity ratio
  0.832
  0.560
  0.610
  0.640
  0.660
  0.680
  0.680
  0.690
  0.690
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.700
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
Adjusted equity ratio
  0.381
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586
  0.586

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -97
  -617
  -966
  -1,457
  -2,128
  -3,017
  -4,164
  -5,608
  -7,384
  -9,526
  -12,059
  -15,004
  -18,377
  -22,187
  -26,438
  -31,129
  -36,255
  -41,810
  -47,784
  -54,169
  -60,953
  -68,129
  -75,689
  -83,626
  -91,937
  -100,619
  -109,675
  -119,108
  -128,922
  -139,128
  -149,737
Depreciation, amort., depletion, $m
  122
  245
  379
  567
  822
  1,160
  1,594
  2,140
  2,810
  3,616
  4,567
  5,671
  6,934
  8,358
  9,944
  11,692
  13,601
  15,667
  17,887
  20,258
  22,776
  25,438
  28,241
  31,183
  34,262
  37,478
  40,832
  44,324
  47,958
  51,737
  55,664
Funds from operations, $m
  136
  -372
  -587
  -891
  -1,306
  -1,857
  -2,570
  -3,468
  -4,574
  -5,910
  -7,492
  -9,333
  -11,444
  -13,830
  -16,494
  -19,437
  -22,654
  -26,143
  -29,897
  -33,910
  -38,177
  -42,691
  -47,448
  -52,443
  -57,675
  -63,141
  -68,843
  -74,783
  -80,964
  -87,392
  -94,073
Change in working capital, $m
  2
  -51
  -74
  -104
  -141
  -187
  -241
  -302
  -371
  -446
  -527
  -611
  -699
  -788
  -878
  -968
  -1,057
  -1,144
  -1,230
  -1,313
  -1,394
  -1,474
  -1,552
  -1,629
  -1,705
  -1,781
  -1,857
  -1,934
  -2,012
  -2,092
  -2,175
Cash from operations, $m
  134
  -321
  -513
  -787
  -1,164
  -1,670
  -2,329
  -3,166
  -4,203
  -5,464
  -6,965
  -8,721
  -10,745
  -13,041
  -15,616
  -18,468
  -21,597
  -24,999
  -28,667
  -32,597
  -36,782
  -41,217
  -45,895
  -50,814
  -55,969
  -61,360
  -66,986
  -72,849
  -78,952
  -85,299
  -91,898
Maintenance CAPEX, $m
  0
  -153
  -245
  -379
  -567
  -822
  -1,160
  -1,594
  -2,140
  -2,810
  -3,616
  -4,567
  -5,671
  -6,934
  -8,358
  -9,944
  -11,692
  -13,601
  -15,667
  -17,887
  -20,258
  -22,776
  -25,438
  -28,241
  -31,183
  -34,262
  -37,478
  -40,832
  -44,324
  -47,958
  -51,737
New CAPEX, $m
  -454
  -919
  -1,336
  -1,877
  -2,555
  -3,377
  -4,346
  -5,457
  -6,700
  -8,058
  -9,513
  -11,042
  -12,624
  -14,238
  -15,863
  -17,484
  -19,086
  -20,662
  -22,204
  -23,710
  -25,181
  -26,618
  -28,028
  -29,417
  -30,792
  -32,162
  -33,537
  -34,926
  -36,338
  -37,784
  -39,271
Cash from investing activities, $m
  -406
  -1,072
  -1,581
  -2,256
  -3,122
  -4,199
  -5,506
  -7,051
  -8,840
  -10,868
  -13,129
  -15,609
  -18,295
  -21,172
  -24,221
  -27,428
  -30,778
  -34,263
  -37,871
  -41,597
  -45,439
  -49,394
  -53,466
  -57,658
  -61,975
  -66,424
  -71,015
  -75,758
  -80,662
  -85,742
  -91,008
Free cash flow, $m
  -272
  -1,394
  -2,095
  -3,043
  -4,286
  -5,869
  -7,835
  -10,217
  -13,043
  -16,332
  -20,093
  -24,331
  -29,040
  -34,213
  -39,836
  -45,896
  -52,376
  -59,261
  -66,538
  -74,195
  -82,221
  -90,612
  -99,362
  -108,472
  -117,944
  -127,784
  -138,001
  -148,607
  -159,615
  -171,041
  -182,906
Issuance/(repayment) of debt, $m
  185
  531
  773
  1,086
  1,478
  1,954
  2,515
  3,158
  3,877
  4,662
  5,504
  6,389
  7,304
  8,238
  9,178
  10,116
  11,043
  11,955
  12,847
  13,719
  14,570
  15,401
  16,217
  17,021
  17,816
  18,609
  19,405
  20,208
  21,025
  21,862
  22,722
Issuance/(repurchase) of shares, $m
  289
  1,368
  2,060
  2,995
  4,220
  5,783
  7,724
  10,077
  12,872
  16,125
  19,850
  24,048
  28,717
  33,848
  39,430
  45,447
  51,886
  58,732
  65,969
  73,587
  81,576
  89,929
  98,643
  107,718
  117,155
  126,960
  137,142
  147,711
  158,683
  170,073
  181,899
Cash from financing (excl. dividends), $m  
  468
  1,899
  2,833
  4,081
  5,698
  7,737
  10,239
  13,235
  16,749
  20,787
  25,354
  30,437
  36,021
  42,086
  48,608
  55,563
  62,929
  70,687
  78,816
  87,306
  96,146
  105,330
  114,860
  124,739
  134,971
  145,569
  156,547
  167,919
  179,708
  191,935
  204,621
Total cash flow (excl. dividends), $m
  196
  505
  739
  1,038
  1,413
  1,868
  2,403
  3,018
  3,705
  4,456
  5,260
  6,106
  6,981
  7,873
  8,772
  9,668
  10,554
  11,425
  12,278
  13,111
  13,924
  14,719
  15,499
  16,266
  17,027
  17,785
  18,545
  19,313
  20,094
  20,893
  21,716
Retained Cash Flow (-), $m
  -202
  -1,368
  -2,060
  -2,995
  -4,220
  -5,783
  -7,724
  -10,077
  -12,872
  -16,125
  -19,850
  -24,048
  -28,717
  -33,848
  -39,430
  -45,447
  -51,886
  -58,732
  -65,969
  -73,587
  -81,576
  -89,929
  -98,643
  -107,718
  -117,155
  -126,960
  -137,142
  -147,711
  -158,683
  -170,073
  -181,899
Prev. year cash balance distribution, $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 flow adjustment, $m
 
  17
  27
  42
  62
  90
  128
  175
  236
  309
  398
  503
  624
  763
  920
  1,094
  1,287
  1,497
  1,724
  1,968
  2,229
  2,506
  2,799
  3,108
  3,432
  3,770
  4,124
  4,493
  4,878
  5,278
  5,693
Cash available for distribution, $m
 
  -863
  -1,322
  -1,957
  -2,808
  -3,915
  -5,320
  -7,060
  -9,167
  -11,669
  -14,589
  -17,942
  -21,736
  -25,975
  -30,658
  -35,780
  -41,332
  -47,306
  -53,691
  -60,476
  -67,652
  -75,210
  -83,145
  -91,451
  -100,128
  -109,175
  -118,597
  -128,399
  -138,589
  -149,180
  -160,184
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -827
  -1,210
  -1,703
  -2,312
  -3,035
  -3,861
  -4,769
  -5,729
  -6,704
  -7,649
  -8,520
  -9,275
  -9,876
  -10,292
  -10,504
  -10,503
  -10,293
  -9,888
  -9,312
  -8,596
  -7,779
  -6,899
  -5,994
  -5,100
  -4,247
  -3,460
  -2,756
  -2,144
  -1,628
  -1,206
Current shareholders' claim on cash, %
  100
  70.5
  50.5
  36.8
  27.2
  20.5
  15.6
  12.0
  9.4
  7.4
  5.9
  4.7
  3.8
  3.1
  2.5
  2.1
  1.7
  1.4
  1.2
  1.0
  0.8
  0.7
  0.6
  0.5
  0.4
  0.4
  0.3
  0.3
  0.2
  0.2
  0.2

Matador Resources Company is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. The Company's segments include exploration and production, and midstream. The Company's operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. The Company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. Additionally, the Company conducts midstream operations primarily, as of February 17, 2017, through its midstream joint venture, San Mateo Midstream, LLC (San Mateo or the Joint Venture).

FINANCIAL RATIOS  of  Matador Resources (MTDR)

Valuation Ratios
P/E Ratio -32.8
Price to Sales 12.5
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 23.7
Price to Free Cash Flow -9.9
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 NaN
Current Ratio 0
LT Debt to Equity 83.2%
Total Debt to Equity 83.2%
Interest Coverage -3
Management Effectiveness
Return On Assets -5.4%
Ret/ On Assets - 3 Yr. Avg. -15.8%
Return On Total Capital -9.1%
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 $544 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 4.3%, 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 167%.

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 5.8% 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 3.1%.

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 281.7%.

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 -15.6%. 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 - $1258 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 102 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 $3.3 billion.

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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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