GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

A 'Head' of the Game - Regis Corp.

December 24, 2007 | About:
Regis Corp. [NYSE:RGS] 12/24/07 closing price: $28.32

Yield = 0.6% 52-week range: $26.31 - $43.35

Regis is an owner and franchiser of over 12,400 hairstyling salons operating as Regis, SuperCuts, MasterCuts, Trade Secret, WalMart [in store units] and International brand names. They also own 49% of the Empire Beauty School - the largest in America.

Also, and hard not to smile... the Hair Club for Men. [I am NOT a customer].

Although the past two quarters have seen earnings dip slightly year-over-year, the FY [ending June 2008] is likely to come in at $2.14 - $2.20 versus $2.07 in the prior 12 months. Preliminary estimates for the following FY are now at $2.35 /share.

Regis shares have dropped from last February's high of $43.30 making these shares look attractive right now. The 10-year median P/E has been a not too volatile 17X mulitple while today's quote puts RGS at just 13.1X this year's and 12.1X next FY's expectations.

A normalized 17X next year's EPS leads to a target price of $39.95 or + 41% from today's price. Is this achievable? RGS actually traded as high as $41.60, $46.90, $46.60, $43.50 and $43.30 at its peaks in 2003, 2004, 2005, 2006 and 2007 respectively on pretty much the same fundamentals as exist presently.

Value Line assigns Regis a B+ financial strength rating with 90th percentile earnings predictability. LT debt is a reasonable 36% of capitalization. Total interest coverage is a healthy 4.5X.

The company has already completed $176.5 MM of a $300 MM authorized share buyback.

If you're of the mind that the US is entering a recession... then perhaps people will be trading down to Regis hair salons from pricier ones over the next year or two.

Four of our Gurus currently own these shares- and at higher levels than the current price.

Having already been 'clipped' - Regis Corp. shares look to offer 40 - 50% upside and modest risk [RGS now sells for well under the LOWS from the years 2004 - 2006].


About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com
http://www.MutualFunds.com

Visit Dr. Paul Price's Website


Rating: 3.0/5 (10 votes)

Comments

dude
Dude - 6 years ago
Excellent work stockdocx99. Its good to see this type of quick heads up for potentially great opportunities.

I also note that the company requires little capital to expand, achieves high returns on tangible equity and provides a needed service. Peter Lynch also liked Supercuts as a company.
Dr. Paul Price
Dr. Paul Price premium member - 6 years ago
UPDATE 2-Regis posts sharply higher quarterly profit

Wed Apr 23, 2008 1:42pm EDT


NEW YORK, April 23 (Reuters) - Hair salon operator Regis Corp (RGS.N: Quote, Profile, Research) posted a sharply higher quarterly profit on Wednesday due to a price increase and the earliest Easter since 1913.

The operator of the Vidal Sassoon and Supercuts chains said net profit for the third quarter ended March 31 climbed to $19 million or 44 cents a share from $5.3 million, or 12 cents a share a year earlier.

Without a one-time income tax charge, Regis said it would have earned 51 cents a share for the quarter.

On that basis, analysts on average were expecting the company to earn 49 cents a share for the quarter, according to Reuters Estimates.

Same-store service sales climbed 3.3 percent during the period, the highest quarterly increase in eight years, Chief Executive Paul Finkelstein said.

Easter fell on March 23 this year. Last year the holiday came on April 8.

Regis said it raised prices in more than 5,600 salons during the quarter.

Earlier this month, the company said quarterly revenue rose 4 percent to $680 million from $655 million a year ago.

"Regis' key business is stabilizing. People still need to get their hair cut," Bear Stearns analyst Justin Hott wrote in a research note.

"And we think that if the economy begins to pick up, salons will be one of the first areas to see the benefit."

Looking ahead, Regis said it expects fourth-quarter consolidated revenue to climb between 5 and 7 percent to a range of $710 million to $720 million. It sees earnings per share ranging between 55 cents and 62 cents.

Wall Street analysts are expecting fourth-quarter earnings of 57 cents a share on $699.6 million in revenue, according to Reuters Estimates.

The company also forecasted full-year consolidated revenue of $2.74 billion, up 4 percent from a year ago, with earnings per share ranging between $2.03 and $2.10.

Analysts project 2008 earnings of $2.04 per share on $2.74 billion in revenue, according to Reuters Estimates.

"We certainly believe there is potential upside in our restated earnings range coming from future acquisitions and perhaps further cost reduction initiatives," Chief Financial Officer Randy Pearce said in a statement.

For fiscal 2009, Regis sees earnings per share ranging between $2.03 and $2.29 on revenue of about $2.85 billion. Wall Street expects Regis to earn $2.22 a share next year on revenue of about $2.90 billion, according to Reuters Estimates.

Shares of Regis, which have traded in a 52-week range of $22.20 to $41.20, were up 46 cents or 1.7 percent to $27.62 in afternoon trading on the New York Stock Exchange. (Reporting by Justin Grant, editing by Gerald E. McCormick)

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK