The stock of Marathon Digital Holdings (NAS:MARA, 30-year Financials) appears to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $27.82 per share and the market cap of $2.7 billion, Marathon Digital Holdings stock gives every indication of being significantly overvalued. GF Value for Marathon Digital Holdings is shown in the chart below.
Because Marathon Digital Holdings is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Marathon Digital Holdings has a cash-to-debt ratio of 776.18, which which ranks better than 78% of the companies in Capital Markets industry. The overall financial strength of Marathon Digital Holdings is 7 out of 10, which indicates that the financial strength of Marathon Digital Holdings is fair. This is the debt and cash of Marathon Digital Holdings over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Marathon Digital Holdings has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $4.4 million and loss of $0.374 a share. Its operating margin is -205.69%, which ranks in the bottom 10% of the companies in Capital Markets industry. Overall, the profitability of Marathon Digital Holdings is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Marathon Digital Holdings over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Marathon Digital Holdings is -44.7%, which ranks in the bottom 10% of the companies in Capital Markets industry. The 3-year average EBITDA growth rate is 82%, which ranks better than 93% of the companies in Capital Markets industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Marathon Digital Holdings's return on invested capital is -21.76, and its cost of capital is 27.93. The historical ROIC vs WACC comparison of Marathon Digital Holdings is shown below:
In closing, The stock of Marathon Digital Holdings (NAS:MARA, 30-year Financials) is estimated to be significantly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks better than 93% of the companies in Capital Markets industry. To learn more about Marathon Digital Holdings stock, you can check out its 30-year Financials here.
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