On Tuesday, RCI Hospitality Holdings (NASDAQ:RICK) shares experienced a significant share price increase of 11.3%, contrasting with a 1.2% dip in the Russell 2000 index. This surge came on the heels of the company's robust fourth-quarter results for fiscal year 2024 and optimistic remarks from management.
H.C. Wainwright maintained a Buy rating on the stock, with a price target steady at $98.00. According to InvestingPro data, the stock has shown impressive momentum with a 32% return over the past six months, though current technical indicators suggest the stock is in overbought territory.
The company's revenue for the quarter aligned with projections, but the adjusted EBITDA notably exceeded expectations, coming in at $17.9 million compared to the forecasted $13.9 million. This improvement in profitability is attributed to enhanced operational discipline within the restaurant segment and the strategic closure of several underperforming locations.
InvestingPro analysis reveals an impressive gross profit margin of 86.14%, with the company maintaining strong financial health as indicated by its GOOD overall score. Subscribers to InvestingPro can access 12 additional key insights about RICK's financial performance.
Although these closures may temporarily affect revenue, RCI Hospitality is set to launch new, distinctive restaurant properties. This includes the company's inaugural downtown location, anticipated to open in the first half of 2025. The firm is working towards achieving a restaurant margin of 15.0%, and these new venues are expected to contribute to this goal.
Further growth is on the horizon for RCI Hospitality, as the company may announce acquisitions of one or more clubs in the upcoming months. Such acquisitions would likely bolster revenue, adjusted EBITDA, and free cash flow for fiscal year 2025.
The company has also set ambitious targets for 2029, aiming for $400.0 million in revenue and $75.0 million in free cash flow, although these goals are seen as potentially conservative given the company's strategic capital allocation. With a current market capitalization of $516.56 million and an EV/EBITDA ratio of 10.69x, detailed valuation metrics and growth projections are available in the comprehensive Pro Research Report on InvestingPro.
Lastly, with the expansion of Bombshells restaurants set to conclude in fiscal year 2025 and projected lower capital expenditures, RCI Hospitality may increase share repurchases. Investors are encouraged to build their positions in anticipation of the company's improved operating performance in fiscal year 2025. The firm's Buy rating and $98 price target on RICK shares remain unchanged.
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