8 Most Undervalued Small-Cap Stocks To Buy According To Analysts

4. Matador Resources Co. (NYSE:MTDR)

Forward Price-to-Earnings Ratio: 5.41

Average Upside Potential: 43.18%

Number of Hedge Fund Holders: 37

Matador Resources Co. (NYSE:MTDR) is an independent oil and gas exploration and production company operating primarily in the US. It focuses on developing unconventional oil and gas resources, particularly in the Permian Basin. It’s known for its efficient operations, low-cost production, and strong focus on maximizing shareholder value.

The company made $847.14 million in revenue for the second quarter of 2024, up 32.76% from a year-ago period. The earnings per share were $2.05. Both of these values beat analyst expectations for the quarter. It has a strong financial foundation, evidenced by its high Return on Equity of 21%, which is significantly higher than the industry average of 16%. This has contributed to impressive earnings growth of 44% in the last 5 years.

The company reinvests a substantial portion of its profits back into the business, indicating a commitment to growth. While analysts predict slower earnings growth in the future, its strong financials suggest that the market might be undervaluing the company.

The company recently completed its $1.832 billion acquisition of a subsidiary of Ameredev II Parent, LLC on September 19. This strategic move expands Matador Resources Co.’s (NYSE:MTDR) footprint in the Delaware Basin, a key US oil and gas region. The acquired assets include ~33,500 contiguous net acres in the Delaware Basin, with significant production potential. It plans to leverage operational efficiencies to generate synergies and increase production. The acquisition also adds 118 million barrels of oil equivalent in proved reserves.

Given its robust financials, operational efficiency, and commitment to shareholder value, the company is a promising investment option.

TimesSquare Capital U.S. Small Cap Growth Strategy stated the following regarding Matador Resources Company (NYSE:MTDR) in its first quarter 2024 investor letter:

“We often see the ebb and flow of the Energy sector tied to underlying commodity prices. In this area, we seek low-cost exploration & production companies with high-yielding acreage or specialized service providers. Matador Resources Company (NYSE:MTDR) is an exploration and production company with operations in the Delaware Basin of Southeast New Mexico and West Texas. Its shares were boosted 18% by a solid fourth quarter with higher-than-expected production volume and lower operating expenses.”