Image Source: Pixabay

As part of our ongoing series here at The Acquirer’s Multiple, each week we spotlight a stock from our Stock Screeners that might be a deeply undervalued gem hiding in plain sight.

The stock this week is:

Mesabi Trust (MSB)

Mesabi Trust is a royalty trust that collects and distributes iron ore royalties from operations in Minnesota’s Mesabi Iron Range. With no debt, minimal operating expenses, and a mandate to return nearly all cash flow to shareholders, MSB stands out as a pure cash flow play — particularly attractive at today’s valuation.

What is IV/P (Intrinsic Value to Price)?

IV/P tells you whether a stock offers more intrinsic value than the price you’re paying for it.

The Calculation:
It blends the company’s earnings power, reinvestment efficiency, and shareholder return strategy (like buybacks and dividends) to estimate its intrinsic value — what the company is worth based on fundamentals.

The Interpretation:

• IV/P > 1 → Stock may be undervalued
• IV/P < 1 → Stock may be overvalued

The further above 1, the more potential value you’re getting for each dollar invested.

IV/P for MSB: 24.90

MSB currently sports an IV/P of 24.90, suggesting its estimated intrinsic value is nearly 25x its market price.

Put simply:
For every $1 you invest, you’re potentially getting $24.90 of value — an extraordinary margin of safety that reflects the trust’s efficient distribution model and royalty income strength.

Supporting Metrics

Free Cash Flow Yield: 25.11%
Mesabi Trust generated $93.5 million in free cash flow over the past year on a market cap of just $372 million, delivering one of the highest FCF yields in the market.

Acquirer’s Multiple: 3.74
This reflects the price paid (enterprise value) for each dollar of operating income. With no debt and minimal capital needs, MSB’s multiple under 4 suggests deep value relative to earnings power.

Revenue & Profitability:

• Revenue (TTM): $23.79 million
• Net Margin: 393% (inflated due to one-time income)
• Operating Margin: ~80% (consistent across years)
• ROE / ROA: Not meaningful — MSB is structured to pass through income, not build equity

Capital Returns: Pure Dividends

• Buyback Yield: 0% (as a trust, MSB doesn’t repurchase shares)
• Dividend Yield (TTM): 24.4%
• Forward Dividend Yield: 4.91% (based on $1.37/share guidance)
• Payout Ratio: ~100% of earnings

In the past 12 months, MSB returned nearly a quarter of its market cap directly to shareholders in the form of cash distributions.

Why Might MSB Be Undervalued?

Royalty Trust Overlooked
Trusts like MSB are often excluded from institutional models due to their pass-through nature and limited reinvestment potential — yet they generate massive cash.

Commodity Volatility Discount
MSB’s earnings are tied to iron ore pricing and shipment volumes — which introduces volatility. But that also creates opportunity when prices normalize.

Small-Cap Simplicity
With no debt, minimal assets, and a fixed structure, MSB is a model of transparency. For investors who prize predictable cash flow and exposure to hard assets, it’s hard to beat.

Conclusion

With an IV/P of 24.90, FCF Yield of 25.11%, Acquirer’s Multiple of just 3.74, and a direct distribution structure that returned over $90 million to shareholders last year, Mesabi Trust (MSB) looks like one of the purest free cash flow stories in the market today. For investors seeking outsized yield, commodity exposure, and a simple model with no dilution or capex risk — MSB may be an overlooked gem worth further investigation.

More By This Author:

Domino’s Pizza Inc.: Our Calculation Of Intrinsic Value
Growth Still Leads, But Value Makes A Comeback In Small Caps
American Express - Our Calculation Of Intrinsic Value