Vail Resorts: A Mountain of Potential

09/02/2016 7:00 am EST


Our latest Focus Stock — which carries S&P Global’s highest investment recommendation of 5-STARS, or “strong buy” — is a major operator of ski resorts, notes S&P Global Equity Analyst Tuna Amobi in S&P The Outlook.

Vail Resorts (MTN) is focused on luxury destination-based travel at a number of popular locations. Its domestic portfolio includes some of the most visited ski resorts in the US.

These are primarily located in Colorado (Vail and Breckenridge) and Lake Tahoe (Heavenly and North Star), as well as Utah (Canyons and Park City), California, and Nevada.

Vail has recently accelerated its expansion across geographic locations and services, while further diversifying its revenue streams into lodging and ancillary businesses.

In July 2015, MTN acquired Perisher, the largest mountain resort in Australia (its first and only international acquisition), for about $136 million in cash.

In September 2014, it acquired Park City Mountain Resorts, a privately held rival resorts operator in Utah, for $182.5 million in cash.

Also, in June 2016, the company significantly expanded its lineup of family-oriented summer activities, under its Epic Discovery label, at select locations, in a move that could at least provide some buffer for its off-season earnings volatility.

We see an attractive upside for the shares at current levels. Our 12-month target price is $170, on a relatively ample EV/EBITDA of 13.4X our FY 2017 estimate.

We think MTN’s premium multiple is partly warranted by its unique position in the niche market for ski-focused luxury resorts.

Also Vali's recent acquisitions and other investments likely foster increased business and geographic diversification. The stock’s recent 2.3% dividend yield adds to total return.

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By Tuna Amobi, S&P Global Equity Analyst in S&P The Outlook

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