Analysis of Marathon Digital Holdings Inc (MARA)

Marathon Digital Holdings Inc (MARA) is presented as a potential value opportunity, with its current stock price of $9.22 showing an 8.47% gain in a day and a 3-month decrease of 31.73%. The fair valuation, indicated by its GF Value, is $25.77, suggesting potential undervaluation.

GF Value:

• The GF Value is determined through a proprietary method that considers historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow), a GuruFocus adjustment factor based on past returns and growth, and future estimates of business performance.

Risk Factors:

• Despite the seemingly attractive valuation, there are risk factors to consider.
• Altman Z-Score: Marathon Digital Holdings has a low Altman Z-Score of -0.5, indicating potential financial distress. The Altman Z-Score predicts the probability of a company entering bankruptcy within a two-year timeframe. A score below 1.8 suggests a high likelihood of financial distress.

Altman Z-Score Components:

1. Working Capital to Total Assets Ratio: The declining trend in this ratio over the past few years (2021: 0.01; 2022: 0.00; 2023: 0.00) suggests potential liquidity issues, contributing to the low Altman Z-Score.
2. EBIT to Total Assets Ratio: The EBIT to Total Assets ratio measures operational effectiveness by correlating earnings before interest and taxes (EBIT) to total assets. A recent dip in this ratio (2021: -0.06; 2022: -0.13; 2023: -0.38) indicates a potential underutilization of assets to generate operational profits, impacting the Z-Score.

Company Overview:

• Marathon Digital Holdings focuses on mining digital assets, owning cryptocurrency mining machines and a data center. The company operates in the Digital Currency Blockchain segment, with its cryptocurrency machines located in the United States.

Conclusion:

• Despite the apparent undervaluation, the low Altman Z-Score and declining financial health raise concerns about Marathon Digital Holdings potentially being a value trap. Thorough due diligence and careful consideration of these risk factors are recommended before making investment decisions.