Bitcoin (BTC) mining heavyweights Marathon Digital and Riot Platforms are among the most overvalued crypto mining companies compared to their competitors, says Jaran Mellerud, founder and analyst at MinerMetrics.
The key metric that supports Mellerud’s claim is the enterprise value-to-sales ratio, or the measurement of a company’s value relative to its revenue. The higher the ratio, the more overvalued a company is.
The miners with the highest EV/S ratios are Cipher at 7.8, Marathon and Iris Energy each at 5.6, and Riot at 5.5, according to a November 3 report from Mellerud.
Mellerud attributed the heavyweight’s high EV/S ratios to receiving more institutional attention from firms like BlackRock.
“These companies have historically been favored by institutional investors like Blackrock and Vanguard, providing them with superior access to capital and higher valuations like the rest of the sector. »
Mellerud told Cointelegraph in the coming months he expects investors to start investing in other players “which could even out the valuation gaps between these stocks,” he said.
He suggested that there are better priced opportunities with lower EV/S ratios that could be exploited.
“There are immense valuation gaps in the Bitcoin mining sector that value investors can take advantage of.”
Riot’s high EV/Hashrate ratio, at 156, is another indicator pointing to its overvaluation, says Mellerud.
Mellerud, a former analyst at Bitcoin miner Luxor Technology, noted that Riot has built in “massive growth” as it builds its gigawatt site and expects delivery of 33,000 MicroBT machines in early 2024.
“Additionally, Riot has several lines of business that are not reflected in its self-operating hashrate, which means we need to be careful when drawing valuation conclusions from its high EV/Hashrate ratio ” added Mellerud.
The Bitcoin mining sector rebounded strongly in 2023, led by Marathon (MARA) and Riot (RIOT), whose stock prices increased by 170% and 228%, respectively, according to Google Finance.
Mining stocks have outperformed Bitcoin over the same period, which has gained 113% year to date according to data from Cointelegraph Markets Pro.
Related: Bitcoin mining can help reduce global emissions by up to 8%: report
Not all mining analysts believe Bitcoin mining stocks will continue to rise.
Cubic Analytics founder Caleb Franzen noted that Bitcoin has already reached its year-to-date high price, while major mining stocks are still more than 75% off their year-to-date high prices. ‘year.
Franzen questioned whether Bitcoin mining companies will soon need to become twice as productive in light of the upcoming Bitcoin halving event.
“If block rewards are halved, the price of BTC will need to double after the halving for their business to be as sustainable as it was before the halving.”
Marathon has the largest Bitcoin holdings among mining companies with 13,726 BTC, worth $486.1 million. Hut 8, Riot and CleanSpark follow with respective holdings of 9,366 BTC, 7,309 BTC and 2,240 BTC.
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