Critical Review: Diamondback Energy (NASDAQ:FANG) versus Matador Resources (NYSE:MTDR)

Diamondback Energy (NASDAQ:FANG) and Matador Resources (NYSE:MTDR) are both energy companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, risk, earnings, profitability, valuation and dividends.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Diamondback Energy and Matador Resources, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Diamondback Energy	0	5	16	4	2.96
Matador Resources	0	6	10	0	2.63

Diamondback Energy presently has a consensus price target of $223.26, suggesting a potential upside of 10.31%. Matador Resources has a consensus price target of $65.08, suggesting a potential upside of 16.22%. Given Matador Resources’ higher probable upside, analysts clearly believe Matador Resources is more favorable than Diamondback Energy.

Volatility and Risk

Diamondback Energy has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500. Comparatively, Matador Resources has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500.

Insider & Institutional Ownership

90.0% of Diamondback Energy shares are owned by institutional investors. Comparatively, 92.0% of Matador Resources shares are owned by institutional investors. 0.6% of Diamondback Energy shares are owned by insiders. Comparatively, 5.9% of Matador Resources shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Diamondback Energy and Matador Resources”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Diamondback Energy	$15.03 billion	3.79	$1.66 billion	$0.86	235.35
Matador Resources	$3.70 billion	1.88	$759.22 million	$3.89	14.39

Diamondback Energy has higher revenue and earnings than Matador Resources. Matador Resources is trading at a lower price-to-earnings ratio than Diamondback Energy, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Diamondback Energy and Matador Resources’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Diamondback Energy	1.87%	7.76%	4.67%
Matador Resources	14.41%	11.20%	5.62%

Dividends

Diamondback Energy pays an annual dividend of $4.40 per share and has a dividend yield of 2.2%. Matador Resources pays an annual dividend of $1.50 per share and has a dividend yield of 2.7%. Diamondback Energy pays out 511.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Matador Resources pays out 38.6% of its earnings in the form of a dividend. Diamondback Energy has increased its dividend for 7 consecutive years and Matador Resources has increased its dividend for 4 consecutive years. Matador Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Matador Resources beats Diamondback Energy on 10 of the 18 factors compared between the two stocks.

About Diamondback Energy

Diamondback Energy, Inc., an independent oil and natural gas company, acquires, develops, explores, and exploits unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. It focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin; and the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin in West Texas and New Mexico. The company also owns and operates midstream infrastructure assets, in the Midland and Delaware Basins of the Permian Basin. Diamondback Energy, Inc. was founded in 2007 and is headquartered in Midland, Texas.

About Matador Resources

Matador Resources Company, an independent energy company, engages in the exploration, development, production, and acquisition of oil and natural gas resources in the United States. It operates through two segments, Exploration and Production; and Midstream. The company primarily holds interests in the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. It also operates the Eagle Ford shale play in South Texas; and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. In addition, the company conducts midstream operations in support of its exploration, development, and production operations. Further, it provides natural gas processing and oil transportation services; and oil, natural gas, and produced water gathering services, as well as produced water disposal services to third parties. The company sells natural gas to unaffiliated independent marketing companies and unaffiliated midstream companies. The company was formerly known as Matador Holdco, Inc. and changed its name to Matador Resources Company in August 2011. Matador Resources Company was founded in 2003 and is headquartered in Dallas, Texas.