Amidst the fluctuating landscape of the stock market, Cleanspark Inc (CLSK, Financial) has shown a remarkable daily gain of 11.9% and an impressive 3-month gain of 135%. However, with a Loss Per Share of 1.41, investors are faced with the critical question: Is Cleanspark significantly overvalued? This article delves into the valuation analysis of Cleanspark, providing investors with a clearer picture of the stock's intrinsic value. Read on to explore our detailed assessment.
Company Introduction
Cleanspark Inc (CLSK, Financial) is a bitcoin mining company that has ventured into the industry through the acquisition of ATL. As bitcoin mining constitutes the company's sole reportable segment, Cleanspark's market activities are pivotal to understanding its valuation. With a current stock price of $10.34 and a market cap of $1.90 billion, a comparison between Cleanspark's trading price and the GF Value—an estimate of fair value—becomes essential. This comparison will not only shed light on the company's financial standing but also on its potential investment value.
Summarizing the GF Value
The GF Value is a unique measure that represents the intrinsic value of a stock, calculated through a proprietary method. It takes into account historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line, depicted on our summary page, suggests the fair trading value for the stock. If a stock's price significantly exceeds the GF Value Line, it is deemed overvalued, indicating a potential decline in future returns. Conversely, if the price is well below this line, higher future returns may be expected.
According to GuruFocus calculations, Cleanspark's stock appears to be significantly overvalued. This assessment is based on historical trading multiples, past business growth, and analyst estimates of future business performance. The implication of this overvaluation is that the long-term return on Cleanspark's stock may fall short of the company's future business growth.
Link: Discover companies that may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with robust financial strength can mitigate the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage provide insights into a company's financial resilience. Cleanspark boasts a cash-to-debt ratio of 5.15, surpassing 62.4% of its peers in the Capital Markets industry. With an overall financial strength rank of 8 out of 10, Cleanspark's financial health is considered strong.
Profitability and Growth
Consistent profitability over time signifies lower risk for investors. Cleanspark, however, has faced challenges in this area, with no profitability over the past decade. The company reported a revenue of $168.90 million and a Loss Per Share of $1.41 over the past twelve months. With an operating margin of -72.76%, Cleanspark ranks lower than 86.82% of companies in its industry, reflecting poor profitability with a rank of 3 out of 10.
The growth of a company is a crucial valuation factor, often linked to long-term stock performance. Cleanspark's 3-year average annual revenue growth rate is 16.3%, which is commendable within its industry. Moreover, its 3-year average EBITDA growth rate is 58.3%, positioning it better than 85.21% of its industry counterparts.
ROIC vs. WACC
Evaluating a company's profitability also involves comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). ROIC assesses cash flow generation relative to invested capital, while WACC represents the average rate a company pays to finance its assets. When ROIC exceeds WACC, value creation for shareholders is indicated. However, Cleanspark's ROIC of -23.11 is below its WACC of 23.26, suggesting challenges in generating shareholder value.
Conclusion
In summary, Cleanspark (CLSK, Financial) appears significantly overvalued when considering its current market price. Despite a strong financial condition, the company's profitability is weak, and its growth prospects are relatively better within the Capital Markets industry. For a more in-depth understanding of Cleanspark's financials, interested parties can explore the company's 30-Year Financials here.
To discover high-quality companies that may offer above-average returns, take a look at the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
