America’s Trains is raising at a pre-money valuation beginning at $947,000 for the first $50,000 invested, and the highest-tier valuation will be $1.1 million. This valuation may look very attractive. However, given that the company’s traction is somewhat offset by the positive perks that it offers investors, our system has rated its price as average on our one-to-five scale.

At first glance, the market opportunity for America’s Trains may seem significant. After all, the global luxury travel market was estimated to be worth $1.8 trillion in 2018. With an annualized growth rate of 4.6%, the space should grow to $2.5 trillion by 2025. The global passenger rail transport market was worth $221.2 billion in 2020. A growth rate of 6% per annum should take it to $307.4 billion by 2025. People across the US took 2.1 billion trips by rail in 2019, and train travel is expected to experience a post-pandemic boost in popularity. 

Despite these promising numbers, it’s important to keep in mind that America’s Trains is largely focused on the US market and parts of Canada. Given the company’s heavy reliance on Amtrak and Amtrak’s overall business model, Amtrak’s own performance is a good proxy for evaluating America’s Trains’ market opportunity. In 2019, Amtrak generated revenue of $3.5 billion. Due to the COVID-19 pandemic, this shrank to $2.4 billion in 2020. It is difficult to imagine the market opportunity for America’s Trains coming in at or above these figures, unless the company decides to venture to other parts of the world. Given the small market size, our system rated the market opportunity near the low end of our scale.

America’s Trains Founder and CEO Barry Jones previously served as a principal, officer, and manager at various resort, cruise, yacht, and train companies. He has been active in this space since at least 1974. During that time, he also worked on the acquisition, rebuilding, and operation of a hovercraft and worked as a travel industry franchisor. This extensive experience earns the America’s Trains team an  above-average score on our one-to-five scale.

America’s Trains’ main selling point is that it provides multi-day luxury trips. But this is not a novel offering. There are also plenty of existing options for short-term luxury trips. One could argue the biggest difference here is the luxury side of the value proposition, but determining the degree of luxury from one provider to the next is more of a subjective art than a science. Because of this, our system has rated the company just above average on the prospect of differentiation.

In some respects, America’s Trains has done well. The company has one railcar under its belt that has already been rebuilt and is ready for launch. Management has plans to generate revenue this year and already has relationships with Amtrak and other railroad operators. Completing the product and being nearly prepared for launch is half the battle. However, the company has some performance problems. It has failed to generate any revenue over the past three years. Over the same time frame, it has generated an aggregate net loss of $217,165 with net operating cash outflows matching these losses. Because of this, our system has rated the company about average on the prospect of performance.

America’s Trains comes with more risk than most startups. In all, the risk profile of the company rates near the high end of our scale. First, a single-founder company always carries significantly more risk than a business built by multiple founders. That is because the company will usually live or die by that single founder. The company also comes with high financial risk — namely, the absence of revenue and the significant aggregate net losses and net cash outflows. 

Lesser risks include market risk and funding risk. On the market side, the opportunity for the company is small, and it faces significant competition. On the funding side, there is the possibility of additional dilution in the future. Expansion will be costly, and the business will likely continue to generate net losses and net cash outflows while it is growing its physical footprint. Growth is limited based on the company’s assets, so unless performance per railcar is very attractive and bookings are high, there is significant risk of a downturn. The picture is also uncertain because of the buyback provision of the company’s shares. This could expose America’s Trains to significant liquidity and solvency concerns at a time when it is particularly vulnerable.

America’s Trains has a narrow market opportunity. The company has a single founder, which exposes it to some undue risk. Management has yet to generate any revenue, and net losses have been significant. The product has little differentiation compared to its competitors. The company is also trying to launch at a time when the tourism industry has seen far better days. Its buyback provision adds additional risk, as it could expose America’s Trains to liquidity or solvency issues. In all, investors should be aware that this is a very risky investment.

Though America’s Trains is a single-founder company, the man in charge does have extensive experience in the industry. The product is at least marginally differentiated from the competition. And the company already has important relationships in place. The valuation looks particularly low compared to most startups, though some might argue that low valuation is justified.

America’s Trains has an experienced founder, has already established some useful relationships and sports a favorable valuation. On the other hand, there are some major risks to consider. America’s Trains has only one founder, meaning its future is entirely in his hands. The company has only lost money so far, and it is launching in the hard-hit tourism industry while the country is still struggling with the pandemic. While the firm may go on to generate significant returns for its investors, the risks appear quite high. Because of that, our team has rated the company as an Underweight prospect.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Daniel Jones.