Is Mesabi Trust (NYSE:MSB) Overvalued at 13.12x Price To Sales?

in INVESTING IDEAS by

Mesabi Trust (NYSE:MSB) is currently trading at $23.87, at approximately 92.8% of its 52-week high of $25.72. With the stock price up 7.7% in the last year, investors are worried that the company is getting too expensive. So, is Mesabi Trust overvalued? In this article, we’ll discuss Mesabi Trust’s valuation using different valuation models.

Historical Valuation

One of the quickest ways to spot if a company is getting too expensive is to compare the current valuation to its historical one. We can use the price to sales ratio to cut the noise and avoid the volatility of the company’s earnings.

Considering Mesabi Trust’s latest twelve months revenue/share of $1.64 and using the company’s 5-year average price to sales of 10.50x as a benchmark, we have a fair value of $17.26, which is -27.7% lower than the current price.

With no surprise, we can see that Mesabi Trust’s price to sales of 14.5x is much higher than its 5-year average of 10.5x, indicating that the company is probably trading in overbought territory. We can easily visualize trends in the company’s fundamentals using the Finbox chart editor, as depicted below.

Source: Finbox Chart Engine

Absolute Valuation: Mesabi Trust DCF Analysis

Using a company’s historical valuation as a benchmark could lead to misleading results if a change in its fundamentals justifies the current valuation. So it’s always preferable to take into account the latest financial forecast and analyze the company with an absolute valuation model.

So, let’s analyze Mesabi Trust with a 5Y DCF analysis (EBITDA exit method). Using the latest 5Y revenue forecast CAGR of 8.9%, an average EBITDA margin forecast of 80.0%, a discount rate of 10.0%, and a terminal EBITDA multiple of 8.7x, we get a fair value of $19.9.

So, Is Mesabi Trust Overvalued?

Relying only on one or two financial models to determine a company’s fair value is never a good idea. It’s always preferable to use different models before coming to hasty conclusions.

The Finbox Fair Value Estimate is an advanced financial modeling technology that uses eleven different models to estimate the fair value of a stock and lets you get a company’s fair value at your fingertips. All the models are based on the same data utilized by the biggest investment banks and money managers in the world.

According to the estimate, Mesabi Trust’s fair value is $18.65, representing a -21.9% downside from the current price. Below are the fair value estimates for each model.

Source: Finbox Fair Value Estimates

Company’s Profile: Mesabi Trust

Mesabi Trust, a royalty trust, engages in the iron ore mining business in the United States. The company was founded in 1961 and is based in New York, New York.

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