In one of the more interesting publicly traded companies, RCI Hospitality Holdings ($RICK) is the only strip club operator on the NASDAQ. The company is in the news for its most recent purchase (8/20/18) on buying Blush Gentlemen’s Club in Pittsburgh for $15 million. Not only a strip club, but a sports bar, RCI Hospitality picks up the club for $2.5 million in cash, $7.5 million in seller financing, and $5 million for the real estate.
An interesting way to look at RCI Hospitality is as a sin REIT, as they are acquiring the land that these clubs sit on, and a vast majority of established strip clubs have been grandfathered in areas that have seen restrictions on the number of licenses and operators who can open. This type of strategy not only makes the land and license incredibly valuable, but also allows significant opportunities for owners.
The strip club that pays you
Looking at comparisons again between REIT’s and RCI Hospitality, $RICK pays out a modest dividend, at 0.36%, or $0.12 a share. Not great, but still paid. More than we can say for our buddies at $TSLA. Growth at the company has been decent as well, with the share price seeing a 20% gain year to date, and a 39.66% appreciation on a rolling 52 week basis. A 13.5% profit margin and a very small payout ratio of 5.3% mean that RCI is focused on growing the business, and keeping money to work, while still taking care of investors. Earnings per share has also increased 40.30% quarter over quarter, indicating a fairly healthy business. This is one time that a strip club would pay you.
Growth for RCI Hospitality
Analyzing $RICK, there is still quite a bit of room for growth, and share appreciation. Strip clubs aren’t going anywhere anytime soon, so let’s see what the future looks like. A 5 YR Discounted Cash Flow growth exit model puts RICK at a price target of $46.69, representing a 39% upside. A 10 YR Discounted Cash Flow EBITDA exit puts the price even higher at $48.57, a 44% upside.
With a dividend payout, and strong possibilities for growth, this is a fantastic stock to get in now while you can.