As a relatively young industry with little historical data by which to measure the performance of different players, determining the best Bitcoin mining stocks to invest in can be difficult.
Nevertheless, MinerMetrics has developed an assessment framework to help investors make more informed choices. Crunching the numbers, the latest company’s latest report suggests that two of the world’s largest Bitcoin miners are overvalued.
According to MinerMetrics’ report on the state of the Bitcoin mining market, a comparison of several performance metrics suggests that Marathon Digital and Riot Platforms have both fallen behind rival companies.
For example, looking at different companies’ stock market valuation relative to their annual revenue, the report finds that Marathon has an enterprise value-to-sales (EV/S) ratio of 5.6. In other words, the company’s market capitalization is 5.6 times higher than its annual income.
Of the 21 publicly traded firms MinerMetrics analyzed, Marathon’s EV/S ratio was the second-worst of the lot. Meanwhile, Riot’s score of 5.5 placed it fourth from the bottom of the table.
As the report explains, institutional investors have historically favored large enterprises, inflating their market value. However, with smaller, less well-capitalized alternatives promising to deliver higher returns for each dollar, it concludes that there are “better-priced opportunities” available.
If Marathon’s high EV/S ratio suggests the company is overvalued, 3 firms have an enterprise value that is less than their annual revenue.
While Canada’s Sphere 3D came top of the leaderboard with an EV/S ratio of just 0.5, low profitability and capped growth potential limit its appeal for investors, the report cautions. It makes a similar observation about Mawson, which had an EV/S ratio of 0.7.
Meanwhile, with the third lowest EV-to-Sales ratio, Bitdeer is a highly profitable public mining company with little debt and significant growth potential.
On top of its operations in Norway and the US, in August, Bitdeer opened a 100MW Bitcoin mining facility in Bhutan. Last month, the Bhutan data center mined 211 BTC for the firm, representing approximately 46% of its monthly total.
At the time of writing, Bitdeer shares were trading at $3.72 each, down from an August high of $14. Most of the company’s stock market losses happened in a brutal October selloff, causing a 70% valuation drop.
One explanation for the collapse in Bitdeer’s stock price is that early investors triggered a selling spree on October 10, when shares that had previously been locked flooded the market.
In a recent analysis, H.C. Wainwright called Bitdeer an “under-the-radar crypto miner with compelling growth prospects.” Valuing the company at well above its current trading price, the firm set a $20 for Bitdeer shares. That sentiment is shared by MinerMetrics, which concluded that Bitdeer is “massively undervalued” based on its EV/S ratio.