With EPS Growth And More, Matador Resources (NYSE:MTDR) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Matador Resources (NYSE:MTDR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Matador Resources with the means to add long-term value to shareholders.

See our latest analysis for Matador Resources

How Fast Is Matador Resources Growing Its Earnings Per Share?

In the last three years Matador Resources' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Matador Resources' EPS shot up from US$6.24 to US$9.82; a result that's bound to keep shareholders happy. That's a fantastic gain of 57%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Matador Resources shareholders can take confidence from the fact that EBIT margins are up from 50% to 59%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Matador Resources?

Are Matador Resources Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's good to see Matador Resources insiders walking the walk, by spending US$591k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. Zooming in, we can see that the biggest insider purchase was by Lead Independent Director Timothy Parker for US$196k worth of shares, at about US$43.52 per share.

The good news, alongside the insider buying, for Matador Resources bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$335m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Matador Resources Worth Keeping An Eye On?

You can't deny that Matador Resources has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Matador Resources shapes up to industry peers, when it comes to ROE.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Matador Resources, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.