Ricks Cabaret International [NASDAQ:RICK] – “The Only Thing That Matters are the Numbers” – Stock Valuation Analysis

Ricks Cabaret International

So…lets jump on top of a company I have been tracing for the past month that; By the numbers is a huge winner in terms of the lo-moderate risk, and potential triple return.

First, I want you to take notice of items circled in orange in the first picture. Second, take notice of items circled in green in the second picture. The calculation we will be doing will project the stock price at the end of Q4 in December.

Rick 2

Like the way Ricks Cabaret International looks? I do too!

Reference the second picture with the numbers circled in green.

The important one is the $7,587 which means the company has earned $7,587,000 dollars in the first nine months of this year. We are going to use this first number for the first part of this calculation… and then divide it by the total number of shares on the market for RICKS.

This function is basically the way to derive your: up to 3rd quarter EPS (Earnings Per Share)

$7,587,000 / 9,500,000 = $.7986

Next we are going to take this EPS and multiply it by the Price to Earnings Ratio aka the P/E (Price to Earnings Ratio) [# seen in 1st pic circled in orange on the left]

$.7986 x 10.36 = $8.27

[This would be the theoretical price of the stock if it earned no more money for the rest of the year]

Next we are profit projecting for Ricks in the fourth quarter.

RICKS has made 7,587,000 up to this point in the year… so lets project that it will make 1/3rd of this amount for the fourth Quarter

$7,587,000 / 3 = $2,529,000

Next we add that projection into the first three quarters, which gives us the projected total year profits

$2,529,000 + $7,587,000 = $10,116,000

Now we are going to take this total profit and divide it by the # of shares to get us a new end of 2013 projected EPS

$10,116,000 / 9,500,000 = $1.064

Now lets assume in a perfect world the stock will trade at the same P/E ratio as it does now. So…by multiplying the EPS to the P/E we will arrive at a projected stock price at Q4

$1.064 * 10.36 = $11.02

That is our Ricks Cabaret International projected stock price in mid-December of this year: $11.02

It’s a very basic projection technique that can really help you hone down your potential prospects and give you an idea of where the price should be with a couple of very conservative projections.

NOW FOR THE EXTENDED READING…

Why am I so excited about this company?

1) RICKS is under an REIT (Real Estate Investment Trust) negotiation with all of their properties in order to bring value to its shareholders. Now an REIT’s rule is that a 90% payout needs to occur with all net profits. THIS MEANS THAT RICKS WILL SOON BE A DIVIDED STOCK – Allowing more institutional ownership to occur based on some that are under dividend guidelines. More institutional buying means more demand for the companies shares, and the more buyer demand the higher the price goes!

2) Notice the price pattern since 2007: Lower Highs meets Higher Lows. Based on the price movement I see it as a spring that is slowly being squeezed. Sooner rather than later the pressure will explode and bring us incredible profitability or losses. Either way volatility will soon occur, and the most amount of money is gained/lossed in high volatility

3) Notice the red star in 2007, the price was around $25 a share. Now for a little homework of your own. And I will lay it out for you.

Look at the net income of the company in 2007, the number of shares, and the P/E ratio
Do the same number crunching formula as we did above. Do you notice anything different? [Yep the income was 30% less and the price of the stock is 2.5x higher than it is today]. Now I want you to take this years EPS and multiply it by the P/E ratio of the stock in Q4 2007. What would your projected stock price be today? (Whoever emails me back the figure that’s closest I will definitely congratulate with a prize of 2 free tickets to Pittsburgh, the prize being that you don’t have to go on the trip.)

4) The number found in the steps above clearly shows that stock prices have nothing to do with the earnings, or value of the company. Stocks only rise in price because there are more people demanding to buy it than people who want to sell it. THAT’S IT, that’s the only thing that moves stock prices. So with that in mind if Ricks can continue to promote itself to investors, and drive more demand for buyers we are going to see a very health uptrend continue.

5) If anyone wants to do a field trip to one of the Ricks Cabaret International locations for some investor analysis, just let me know!

Break

Disclosures

Seal of Approval

SM Call Signs

References_Logo

Important NASDAQ:RICK Resource Pages on:

Yahoo Finance | Google Finance | Morningstar

RICK Main Page | RICK Investor Relations

SEC Filings

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST

Copyright © 2013 Fat Pitch Investments. All Rights reserved. This material is for your information only and is not a solicitation, or an offer, to buy or sell securities mentioned in articles past, present or future. Fat Pitch Investments is a firm involved with equity research and valuations. The information contained herein has been obtained from sources that we believe are reliable but in no way is guaranteed by us. Furthermore, this report contains forward looking statements and projections that are based on certain assumptions and expectations that are generated by our proprietary research process. Accordingly, actual results may differ considerably from those reflected in this report due to such factors as those which are listed in the Company’s SEC filings. Any non-factual information in the report is our opinion and is subject to change without notice.

NASDAQ:RICK – NASDAQ:RICK – NASDAQ:RICK – NASDAQ:RICK – NASDAQ:RICK – NASDAQ:RICK

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>