MTN Stock Study (9-18-24)

Posted by Mark on November 2, 2024 at 06:17 | Last modified: September 18, 2024 08:53

I recently did a stock study on Vail Resorts, Inc. (MTN) with a closing price of $182.40.

M* writes:

     > Vail Resorts Inc Bhd [sic] is a resorts and casinos company that
     > operates mountain resorts and ski areas. The company has three
     > business segments that include Mountain, Lodging, and Real Estate.
     > The Mountain segment operates numerous ski resort properties that
     > offer a variety of winter and summer activities, such as skiing,
     > snowboarding, snowshoeing, hiking, and mountain biking. The
     > Lodging segment owns and operates hotels and condominiums.
     > The Real Estate segment owns, develops, and leases real estate,
     > typically near its other properties. The company generates the
     > vast majority of its revenue within the United States.

Over the last 10 years, the medium-size company grows sales and EPS at annualized rates of 8.0% and 14.9%, respectively. Lines are somewhat up, straight, and parallel except for YOY sales dips in ’20 and ’21 along with EPS declines in ’19, ’20, and ’23. Five- and 10-year EPS R^2 are 0.09 and 0.32, and Value Line only gives an Earnings Predictability score of 25.

Over the past decade, PTPM leads peer and industry averages while ranging from 3.5% in ’14 to 18.3% in ’17 with a last-5-year mean of 12.2%. ROE trails peer and industry averages despite increasing from 3.1% (’14) to 20.2% (’23) with a last-5-year mean of 14.1%. Debt-to-Capital is lower than peer and industry averages despite increasing from 44.5% (’14) to 75.1% (’23) with a last-5-year mean of 64.9%.

Quick Ratio is 1.0, and Interest Coverage is 3.4 per M* who assigns a “Narrow” [Quantitative] Economic Moat. Value Line gives a B+ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 0.6% contraction and 4.9% growth for ’24 and ’25, respectively (based on 11 analysts).
• Zacks projects YOY 0.1% contraction and 4.9% growth for ’24 and ’25, respectively (7 analysts).
• Value Line projects 5.1% annualized growth from ’23-’28.
• CFRA projects growth of 0.2% YOY and 2.8% per year for ’24 and ’23-’25, respectively.

My 2.0% per year forecast discounts the long-term estimate due to projections of short-term contraction.

With regard to EPS growth:

• MarketWatch projects 10.8% and 22.5% per year for ’23-’25 and ’23-’26, respectively (based on 13 analysts).
• Nasdaq.com projects growth of 32.7% YOY and 19.7% per year for ’25 and ’24-’26 (8/8/5 analysts for ’24/’25/’26).
• YF projects YOY 3.7% contraction and 30.8% growth for ’24 and ’25 and 5-year annualized growth of 10.3% (10).
• Zacks projects YOY 4.2% contraction and 32.6% growth for ’24 and ’25 and 5-year annualized growth of 8.8% (8).
• Value Line projects 13.5% annualized growth from ’23-’28.
• CFRA projects 4.3% YOY contraction and 13.0% growth per year for ’24 and ’23-’25 and a 3-year CAGR of 13.0%.

My 7.0% annualized forecast is below the long-term-estimate range (mean of three: 10.9% per year). Initial value is ’23 EPS of $6.74/share rather than 2024 Q3 EPS of $7.56 (annualized).

My Forecast High P/E is 31.0. Excluding three triple-digit prints (’14, ’20, and ’21), high P/E over the past decade ranges from 31.9 in ’18 to 44.0 in ’22 with a last-5-year mean of 41.8 and a last-5-year-mean average P/E of 34.0 (excluding same three years for low P/E). I am below the range.

My Forecast Low P/E is 19.0. Excluding extremes of 83.7 (’14), 51.7 (’20), and 59.3 (’21), low P/E over the past decade ranges from 22.0 in ’18 to 30.0 in ’23 with a last-5-year mean of 26.2. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $143.60 is default based on initial value given above. This is 21.3% less than the previous close and 13.0% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 0% in ’21 to 218% in ’20 with a last-5-year mean of 122%. My 55.0% forecast is near bottom of the range (only ’21 is less).

These inputs land MTN in the HOLD zone with a U/D ratio of 3.0. Total Annualized Return (TAR) is 11.9%.

PAR (using Forecast Average—not High—P/E) of 7.7% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I usually start by comparing my inputs with those of Member Sentiment. I will skip this because only four other studies have been done over the past 90 days.

Value Line’s future average annual P/E of 30.0 is greater than mine (25.0).

Value Line projects high EPS of $12.70/share versus my $9.45.

My LSPF exceeds the rule-of-thumb [which really isn’t] 20% discount to previous closing price.

MOS is robust because my inputs are near/below respective analyst/historical ranges.

With regard to valuation, PEG is 2.4 and 3.2 per Zacks and my projected P/E, respectively: both high. Relative Value [(current P/E) / 5-year-mean average P/E] is low at 0.70 (with outlier P/E values excluded).

My chief area of concern for the company is liquidity. I’d like to see Interest Coverage higher, Debt-to-Capital lower, and PR—which I discounted substantially from 2023’s 118%—lower to alleviate concern of a future dividend cut.

Per U/D, MTN is a BUY under $180. BI TAR criterion is met: 293 * ((1 – (15.00 – 1.8) / 100) ^ 5) ~ $144/share given a forecast high price ~ $293.

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