Rick’s Cabaret (RICK): Buy
Business: Strip club operator
Shares out(mm): 8.15
Stock Price: 15.65
Mkt Cap (mm): $127.6
Rationale:
Hopefully sex sells. Rick’s is an upscale strip club and Internet adult website operator. Company projects earnings of $1.25-130 for 2008 and $1.55-1.60 for 2009. At current prices that’s a PE of about 10 for a hopefully high-growth company. Will their acquisition strategy make them the McDonald’s of gentleman’s clubs?
Caveats
High debt and negative net worth. Should be ok if cash flow continues strong.
Some say that sin businesses are immune from economic downturns, but I would think people on a stretched budget will think food and gas before strippers. Recent articles on Las Vegas downturn not encouraging.
References:
2008-2009 Guidance
