What a brutal six months it’s been for Vail Resorts. The stock has dropped 22.1% and now trades at $140.19, rattling many shareholders. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Vail Resorts, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Vail Resorts Not Exciting?

Even with the cheaper entry price, we're swiping left on Vail Resorts for now. Here are three reasons why MTN doesn't excite us and a stock we'd rather own.

1. Decline in Skier Visits Points to Weak Demand

Revenue growth can be broken down into changes in price and volume (for companies like Vail Resorts, our preferred volume metric is skier visits). While both are important, the latter is the most critical to analyze because prices have a ceiling.

Vail Resorts’s skier visits came in at 7.76 million in the latest quarter, and over the last two years, averaged 10.9% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Vail Resorts might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Vail Resorts’s revenue to rise by 3.1%, close to its 2.1% annualized growth for the past two years. This projection doesn't excite us and indicates its newer products and services will not lead to better top-line performance yet.

3. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Vail Resorts, its EPS declined by 51.8% annually over the last five years while its revenue grew by 4.2%. This tells us the company became less profitable on a per-share basis as it expanded.Vail Resorts Trailing 12-Month EPS (Non-GAAP)

Final Judgment

Vail Resorts isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 17.4× forward P/E (or $140.19 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the Amazon and PayPal of Latin America.

Story Continues

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