This S&P 400 Midcap stock maybe as bullish as it sounds

I have deviated from the top-flight of US equities for a change and instead, I am looking to the S&P 400 Midcap index for inspiration and ideas.

One company that fits the bill is NYSE-listed is a prominent player in the US energy sector and one that focuses on the exploration, development, and production of domestic oil and natural gas resources.

Matador Resources (MTD) marches proudly onward

Founded in 2003, by its CEO and Chairman Joseph Foran. Matador has carved out a significant presence in key oil and gas areas like the Delaware Basin in Southeast New Mexico, and West Texas, and the Eagle Ford and Haynesville shale deposits.

In late October the company reported earnings and guidance that exceeded Wall Street’s expectations.

EPS came in at $1.89 versus forecasts of just $1.72.  Matador raised its FY daily production targets to between 167.5 to 172.50 thousand barrels per day, its expectations for Q4 production average out at 171.48k bpd or barrels per day.

And the company banked $113.0 million from the disposal of midstream assets.

Trading well but below its target price

The Matador share price is currently trading around $58.82, with a 52-week range of $47.15 to $71.08.

The 14 Analysts that cover Matador have a $73.50 price target, suggesting there could be significant upside potential and the group rates the stock as a strong buy.

Matador currently trades on a forward PE of just 7.67 times earnings and 1.41 times book value, ratios that are far from demanding.

The company returned to the dividend list in May 2021, and most recently paid 25 cents per share (a 25.0% rise versus the last time out) giving it an annual yield of 1.45%.

Matador has been growing both organically and via acquisition, most recently through the purchase of Ameredev II for $1.832 billion adding to its assets in the Delaware basin.

Once complete, the acquisition is expected to boost Matador’s enterprise value by nearly $2.0 billion.

The fundamentals of the company look encouraging, as does the fact that the founder, Joseph Foran, is still hands-on and a driving force behind the business, with skin in the game.

Matador is almost 94.0% owned by institutions, though company insiders, who have been buying the stock in 2024, have a 6.10% stake in the business. Which has a market cap of $7.34 billion, but an enterprise value of more than $9.40 billion.

What attracted me to the stock, however, was the price action

MTD’s stock price has underperformed the wider market over the last three months, as have many other midcap oil names. However, Matador has started to recover, and dare I say outperform many of its sector peers.

For instance, the stock has risen by +14.0% in the last month, posting 7 one-month highs as it did so. That compares to a +4.94% gain in the S&P 500 Energy sector over the same period.

Yet Matador is not over-bought on an RSI 14 basis, with a reading of just over 65.0.

Looking at the price chart we find that Matador has posted a cluster of MA crossovers post-election. With the 5,10 and 20-day MA lines all moving up through the slower-moving 50-day line a sure sign of positive price momentum.

The stock price has subsequently moved back above a downtrend line drawn, from the mid-April 2024 highs at $71.08. However, it does need to break above resistance found just below $59.00.

The S&P 500 Energy sector has been the second-best performer among the 11 groupings, over the last month, suggesting that the market has a positive stance about the prospects of oil and gas stocks under Donald Trump.

That said oil prices remain down by – 3.0% year to date, and by more than -10.0% over the last 12 months.

If President-elect Trump can do something about that, when he takes office, then the future for Matador could look very bullish indeed.