Vail Resorts (MTN) shares have slumped almost 30% since October to $47 on recession fears. Barron's says investors are ignoring Vail's upside: A steady, rich clientele that's largely unaffected by any downturn; phenomenal snow this season is attracting a new generation of snowboarders, loyal locals, as well as euro-rich (not dollar poor) Europeans; the company's Wyoming resort even pulls in off-season tourists. Recently completed developments are experiencing strong demand, commanding lofty prices of $2,000/sq. ft.
Wachovia analyst Jeffrey J. Donnelly adds a comparable hotel industry enterprise value to an Ebitda ratio of 10, then joins that with the value of Vail's real estate portfolio, which he calculates at $14/share. This means MTN should be trading at $67, or 42% higher. Other bulls say Ebitda will grow 12%-14% over the coming years as tourists increase 5%-6% annually. Rochdale Research analyst Hayley Wolff says Vail will see $1 billion in real-estate cash flow over the next 6-7 years, giving the company enough money to expand current buybacks to 40% of its common stock by 2011. With low debt and rising ticket prices, Vail sees cash flow rising 11% in F2008. Add the real estate cash and net income could double next year to $3/share.