Bitcoin (BTC) mining giants Marathon Digital and Riot Platforms are among the most highly valued cryptocurrency mining companies relative to their competitors, according to MinerMetrics founder and analyst Jaran Mellerud.
A key metric supporting Melerud’s claim is the enterprise value to sales ratio – a measure of a company’s value relative to its sales revenue. The higher the ratio, the more overvalued the company is.
The miners with the highest EV/S ratio are Cipher at 7.8, Marathon and Iris Energy at 5.6 each, and Riot at 5.5. according to Mellerud’s November 3 report.
Melerud attributes the heavyweight’s high EV/S ratio to greater institutional attention from the likes of BlackRock.
“These companies have historically been favored by institutional investors such as Blackrock and Vanguard, giving them access to superior capital and higher valuations like the rest of the industry.”
Melerud told Cointelegraph that in the coming months, he expects investors to start allocating to other stocks, “which may eliminate the valuation differences between these stocks.”
He suggested taking advantage of opportunities with better prices and lower EV/S ratios.
“There is a huge valuation differential in the Bitcoin mining industry, and value investors can take advantage of this.”
Mellerud said Riot’s EV-to-hash rate ratio is as high as 156, another indicator that it is overvalued.
Mellerud, a former analyst at Bitcoin miner Luxor Technology, noted that Riot has “massive growth” in mind as it builds a gigawatt site and awaits delivery of 33,000 MicroBT machines in early 2024.
Mellerud added: “Additionally, Riot has several business lines that are not reflected in its self-mined hashrate, meaning we should be cautious in drawing any valuation conclusions from its high EV to hashrate ratio.”
According to data from Google Finance, the Bitcoin mining industry rebounded strongly in 2023, led by Marathon (MARA) and Riot Games (RIOT), whose stock prices rose by 170% and 228% respectively.
Over the same period, mining stocks have outperformed Bitcoin, which is up 113% year to date, according to Cointelegraph Markets Pro.
related: Bitcoin mining could help reduce global emissions by up to 8%, report says
Not all mining analysts believe Bitcoin mining stocks will continue to rise.
Caleb Franzen, founder of Cubic Analytics famous Bitcoin has reached its highest price so far this year, while top mining stocks are still more than 75% off their year-to-date price highs.
Franzen considered whether Bitcoin mining companies will soon need to double their productivity in light of the upcoming Bitcoin halving event.
“If the block reward is cut in half, the price of Bitcoin will need to double after the halving to make their business as sustainable as it was before the halving.”
Marathon holds the largest number of Bitcoins among mining companies, with 13,726 Bitcoins worth $486.1 million. Hut 8, Riot and CleanSpark follow closely behind, holding 9,366 BTC, 7,309 BTC and 2,240 BTC respectively.
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