We recently compiled a list of the 12 High Growth Low PE Stocks to Buy. In this article, we are going to take a look at where Matador Resources Company (NYSE:MTDR) stands against the other high growth low PE stocks.
Amid the artificial intelligence frenzy, stock valuations have been overlooked. Over the past two years, investors have shunned value-oriented names in favor of high-flying technology names. That has left investment portfolios susceptible to heightened volatility should there be a deep correction as investors react to premium valuations.
While the dust appears to have settled in the aftermath of the massive pullback following the revelation that DeepSeek might be way ahead of most American AI models, Niles, founder and portfolio manager at Niles Investment Management, believes investors should be highly cautious. “I think investors should be cautious about assuming that this is the bottom,” Niles told CNBC’s Sri Jegarath and Chery Kang on Squawkbox Asia.
It’s no secret that most stocks are trading at premium valuations in response to the AI-driven rally. Consequently, the focus is increasingly on high-growth stocks trading at discounted valuations characterized by low price-to-earnings multiple. Likewise, some of the best stocks in this category are backed by solid underlying fundamentals such as robust revenue growth.
READ ALSO: 10 Best European Bank Stocks to Buy According to Analysts and 10 Best Falling Stocks to Invest in Right Now.
High-growth stocks are mostly companies well-positioned to grow their profits more quickly than the typical companies in their industry. However, growth investing is more than just choosing stocks. The focus should always be on companies that have frequently created novel products or services that are expanding their market share, breaking into new markets, or even starting whole new industries.
Similarly, companies that can grow faster than average for extended periods of time and provide shareholders with sizable returns are typically rewarded by the market. Additionally, the potential returns increase with their rate of growth.
Growth stocks are impacted by high inflation because it lowers the projected future value of their earnings. Supply chain limitations, also impact some company’s capacity to grow and other macroeconomic factors slow down the economy as a whole. However, when growth stock prices are low, downturns can present a buying opportunity for long-term investors.
While the focus for the longest time has been on tech giants benefiting from the AI trade, Tom Lee, head of research at Fundstrat Global Advisors, believes investors should consider diversifying their portfolios. Given that valuations in the tech industry appear overblown, financials offer a way out at highly discounted valuations backed by solid underlying fundamentals.
“I think financials to me represent a pretty good fundamental case of change this year because we have a new administration, a Fed that is dovish, yields that aren’t painful for banks — and a time when it could lead to upside for capital markets activity, and multiples are low,” Lee said
Even as investors debate whether the DeepSeek correction amounted to an overreaction focusing on high growth, low PE stocks appear to be a promising play given the heightened volatility in the market.
Our Methodology
To make the list of 12 high growth low PE stocks to buy, we scanned US stock markets using finviz, focusing on high growth stocks with robust revenue growth metrics (more than 25%). We then settled on the 12 stocks that appear undervalued owing to a low price-to-earnings multiple of less than 15 (as of January 29). Finally, we ranked the stocks in ascending order based on hedge funds stakes in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A pipeline snaking its way through the hills and valleys of the Delaware Basin.
Matador Resources Company (NYSE:MTDR)
5-Year Revenue CAGR: 29.04%
Number of Hedge Fund Holders: 30
Forward P/E as of January 29: 7.70
Matador Resources Company (NYSE:MTDR) is an independent energy company that explores, develops, produces, and acquires oil and natural gas resources in the United States. It stands out as one of the best high-growth low PE stocks to buy, having succeeded in growing its revenue at a compound annual growth rate of 29% over the past five years.
Likewise, Matador Resources Company (NYSE:MTDR) plans to accelerate production in 2025, targeting 200,000 barrels of oil equivalent per day, as it looks to take advantage of oil price funding support above the $70 a barrel level. It plans to operate up to nine rigs throughout the year. The company will likely see earnings growth of almost 16% and 20% in 2024 and 2025, respectively.
Amid the increased production, analysts expect Matador Resources Company (NYSE:MTDR) to generate a free cash flow of $1.029 billion, reflecting a 13% yield. The fact that both cash flow and profits support Matador Resources’ dividend yield of 1.64% is encouraging because it typically indicates that the dividend is sustainable.
Overall VIST ranks 8th on our list of the high growth low PE stocks to buy. As we acknowledge the growth potential of VIST as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VIST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
