Unveiling Vail Resorts (MTN)'s Value: Is It Really Priced Right? A Comprehensive Guide
On September 29, 2023, Vail Resorts Inc (NYSE:MTN) closed at $231.54, marking a -4.42% change for the day. Despite a -2.27% loss over the past three months, the company's Earnings Per Share (EPS) (EPS) stands at 7.24. But the question remains: Is the stock significantly undervalued? This article aims to provide a comprehensive valuation analysis of Vail Resorts (NYSE:MTN). Read on to discover the intrinsic value of this stock and its potential for investors.
Company Overview
Vail Resorts Inc Bhd is a leading resorts and casinos company that operates mountain resorts and ski areas. The company's operations are divided into three segments: Mountain, Lodging, and Real Estate. The Mountain segment operates numerous ski resort properties offering a variety of winter and summer activities. The Lodging segment owns and operates hotels and condominiums, while the Real Estate segment owns, develops, and leases real estate, typically near its other properties. The majority of its revenue is generated within the United States.
Understanding GF Value
The GF Value is a proprietary measure used to estimate a stock's intrinsic value. The GF Value Line, displayed on our summary page, provides an ideal fair trading value for the stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Vail Resorts' Valuation
According to the GuruFocus Value calculation, Vail Resorts (NYSE:MTN) appears to be significantly undervalued. The GF Value is calculated based on historical trading multiples, past business growth, and future business performance estimates. Currently, with a market cap of $8.90 billion, the stock price of $231.54 per share indicates that Vail Resorts is significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's vital to review a company's financial strength before purchasing shares. Key indicators include the cash-to-debt ratio and interest coverage. Vail Resorts has a cash-to-debt ratio of 0.29, ranking worse than 60.1% of 827 companies in the Travel & Leisure industry. The overall financial strength of Vail Resorts is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Vail Resorts has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $2.90 billion and Earnings Per Share (EPS) of $7.24. Its operating margin is 20.53%, ranking better than 82.99% of 829 companies in the Travel & Leisure industry. Overall, GuruFocus ranks the profitability of Vail Resorts at 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Vail Resorts's 3-year average revenue growth rate is better than 63.51% of 770 companies in the Travel & Leisure industry. Its 3-year average EBITDA growth rate is 7.6%, ranking better than 55.41% of 610 companies in the Travel & Leisure industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Vail Resorts's ROIC is 7.81 while its WACC came in at 8.76.
Conclusion
In summary, the stock of Vail Resorts (NYSE:MTN) shows every sign of being significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 55.41% of 610 companies in the Travel & Leisure industry. To learn more about Vail Resorts stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
