Intrinsic value of RCI Hospitality Holdings - RICK

Previous Close

$31.18

  Intrinsic Value

$12.86

stock screener

  Rating & Target

str. sell

-59%

Previous close

$31.18

 
Intrinsic value

$12.86

 
Up/down potential

-59%

 
Rating

str. sell

We calculate the intrinsic value of RICK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
(a)
   1
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -100.00
  7.40
  7.16
  6.94
  6.75
  6.57
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
  5.68
  5.61
  5.55
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.24
  5.21
  5.19
  5.17
  5.16
  5.14
  5.13
  5.11
Revenue, $m
  0
  156
  167
  178
  191
  203
  216
  230
  244
  258
  274
  290
  306
  324
  342
  361
  381
  402
  423
  446
  470
  494
  521
  548
  576
  606
  638
  670
  705
  741
  779
Variable operating expenses, $m
 
  117
  125
  133
  141
  149
  158
  167
  177
  187
  197
  196
  208
  219
  232
  245
  258
  272
  287
  302
  318
  335
  353
  371
  391
  411
  432
  454
  478
  502
  528
Fixed operating expenses, $m
 
  12
  13
  13
  13
  13
  14
  14
  14
  15
  15
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
Total operating expenses, $m
  0
  129
  138
  146
  154
  162
  172
  181
  191
  202
  212
  211
  224
  235
  248
  262
  275
  289
  305
  320
  337
  354
  372
  391
  411
  432
  453
  476
  500
  525
  551
Operating income, $m
  0
  26
  29
  33
  37
  40
  44
  48
  52
  57
  62
  78
  83
  88
  94
  100
  106
  112
  119
  126
  133
  140
  148
  157
  166
  175
  184
  195
  205
  216
  228
EBITDA, $m
  0
  65
  70
  76
  82
  88
  94
  100
  107
  114
  121
  129
  137
  145
  154
  163
  172
  182
  193
  204
  215
  227
  239
  252
  266
  281
  296
  312
  328
  346
  364
Interest expense (income), $m
  0
  9
  10
  11
  12
  13
  15
  16
  17
  18
  19
  21
  22
  24
  25
  27
  28
  30
  32
  34
  36
  38
  40
  42
  45
  47
  50
  53
  56
  59
  62
Earnings before tax, $m
  0
  17
  19
  22
  24
  27
  30
  33
  36
  39
  42
  57
  61
  65
  69
  73
  77
  82
  87
  92
  97
  103
  108
  114
  121
  127
  135
  142
  150
  158
  166
Tax expense, $m
  0
  5
  5
  6
  7
  7
  8
  9
  10
  10
  11
  15
  16
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
  34
  36
  38
  40
  43
  45
Net income, $m
  0
  12
  14
  16
  18
  20
  22
  24
  26
  28
  31
  42
  45
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  0
  322
  346
  369
  394
  420
  447
  475
  505
  535
  567
  600
  634
  670
  708
  747
  788
  831
  876
  923
  972
  1,024
  1,078
  1,134
  1,193
  1,255
  1,320
  1,388
  1,460
  1,534
  1,613
Adjusted assets (=assets-cash), $m
  0
  322
  346
  369
  394
  420
  447
  475
  505
  535
  567
  600
  634
  670
  708
  747
  788
  831
  876
  923
  972
  1,024
  1,078
  1,134
  1,193
  1,255
  1,320
  1,388
  1,460
  1,534
  1,613
Revenue / Adjusted assets
  0.000
  0.484
  0.483
  0.482
  0.485
  0.483
  0.483
  0.484
  0.483
  0.482
  0.483
  0.483
  0.483
  0.484
  0.483
  0.483
  0.484
  0.484
  0.483
  0.483
  0.484
  0.482
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
  0.483
Average production assets, $m
  0
  272
  292
  312
  333
  355
  377
  401
  426
  452
  478
  506
  535
  566
  597
  631
  665
  701
  739
  779
  820
  864
  909
  957
  1,007
  1,059
  1,114
  1,171
  1,232
  1,295
  1,361
Working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total debt, $m
  0
  137
  150
  163
  177
  192
  207
  222
  239
  256
  273
  292
  311
  331
  352
  374
  397
  421
  446
  472
  499
  528
  558
  589
  622
  657
  693
  731
  770
  812
  856
Total liabilities, $m
  0
  180
  192
  206
  220
  234
  249
  265
  281
  298
  316
  334
  353
  373
  394
  416
  439
  463
  488
  514
  542
  570
  600
  632
  665
  699
  735
  773
  813
  855
  898
Total equity, $m
  0
  143
  153
  164
  175
  186
  198
  211
  224
  237
  251
  266
  281
  297
  314
  331
  349
  368
  388
  409
  431
  454
  477
  502
  529
  556
  585
  615
  647
  680
  714
Total liabilities and equity, $m
  0
  323
  345
  370
  395
  420
  447
  476
  505
  535
  567
  600
  634
  670
  708
  747
  788
  831
  876
  923
  973
  1,024
  1,077
  1,134
  1,194
  1,255
  1,320
  1,388
  1,460
  1,535
  1,612
Debt-to-equity ratio
  0.000
  0.960
  0.980
  1.000
  1.010
  1.030
  1.040
  1.060
  1.070
  1.080
  1.090
  1.100
  1.110
  1.110
  1.120
  1.130
  1.140
  1.140
  1.150
  1.150
  1.160
  1.160
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
  1.190
  1.190
  1.200
Adjusted equity ratio
  0.000
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443
  0.443

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  12
  14
  16
  18
  20
  22
  24
  26
  28
  31
  42
  45
  47
  50
  53
  56
  60
  63
  67
  71
  75
  79
  84
  88
  93
  98
  104
  109
  115
  121
Depreciation, amort., depletion, $m
  0
  39
  41
  43
  45
  47
  50
  52
  54
  57
  60
  51
  54
  57
  60
  63
  67
  70
  74
  78
  82
  86
  91
  96
  101
  106
  111
  117
  123
  129
  136
Funds from operations, $m
  0
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  93
  98
  104
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
  210
  221
  232
  245
  258
Change in working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  0
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  93
  98
  104
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
  210
  221
  232
  245
  258
Maintenance CAPEX, $m
  0
  -25
  -27
  -29
  -31
  -33
  -35
  -38
  -40
  -43
  -45
  -48
  -51
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
  -96
  -101
  -106
  -111
  -117
  -123
  -129
New CAPEX, $m
  0
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -43
  -45
  -48
  -50
  -52
  -55
  -57
  -60
  -63
  -66
Cash from investing activities, $m
  0
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -114
  -119
  -125
  -131
  -139
  -146
  -153
  -161
  -168
  -177
  -186
  -195
Free cash flow, $m
  0
  7
  8
  9
  10
  12
  13
  14
  16
  17
  18
  17
  18
  20
  22
  23
  25
  27
  29
  31
  33
  36
  38
  41
  43
  46
  49
  52
  55
  58
  62
Issuance/(repayment) of debt, $m
  0
  13
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  0
  13
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  35
  36
  38
  40
  42
  44
Total cash flow (excl. dividends), $m
  0
  20
  21
  23
  24
  26
  28
  30
  32
  34
  36
  35
  38
  40
  43
  45
  48
  51
  54
  57
  61
  64
  68
  72
  76
  81
  85
  90
  95
  100
  106
Retained Cash Flow (-), $m
  0
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  21
  22
  24
  26
  28
  30
  32
  34
  37
  39
  42
  44
  47
  50
  53
  56
  60
  63
  67
  71
Discount rate, %
 
  7.30
  7.67
  8.05
  8.45
  8.87
  9.32
  9.78
  10.27
  10.79
  11.32
  11.89
  12.49
  13.11
  13.77
  14.45
  15.18
  15.93
  16.73
  17.57
  18.45
  19.37
  20.34
  21.35
  22.42
  23.54
  24.72
  25.96
  27.25
  28.62
  30.05
PV of cash for distribution, $m
 
  9
  9
  10
  10
  10
  9
  9
  9
  8
  8
  6
  5
  5
  4
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

RCI Hospitality Holdings, Inc., through its subsidiaries, engages in the hospitality and related businesses in the United States. It operates in two segments, Nightclubs and Bombshells Restaurants/Sports Bars. The company owns and/or operates upscale adult nightclubs serving primarily businessmen and professionals under the Rick’s Cabaret, Vivid Cabaret, Tootsie’s Cabaret, Club Onyx, Jaguars Club, XTC Cabaret, Hoops Cabaret, Downtown Cabaret, Temptations, Silver City Cabaret, Foxy’s Cabaret, Cabaret East, and The Seville brands. It also operates four restaurants/sports bars under the Bombshells brand; and a bar under the Studio 80 brand. As of December 13, 2016, the company operated 41 units that offers live adult entertainment, and/or restaurant and bar operations. In addition, it owns a national industry convention and tradeshow; 2 national industry trade publications; 2 national industry award shows; and approximately 25 industry Websites. The company was formerly known as Rick’s Cabaret International, Inc. and changed its name to RCI Hospitality Holdings, Inc. in August 2014. RCI Hospitality Holdings, Inc. was founded in 1982 and is based in Houston, Texas.

FINANCIAL RATIOS  of  RCI Hospitality Holdings (RICK)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

RICK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RICK stock intrinsic value calculation we used $145 million for the last fiscal year's total revenue generated by RCI Hospitality Holdings. The default revenue input number comes from income statement of RCI Hospitality Holdings. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our RICK stock valuation model: a) initial revenue growth rate of 7.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.3%, whose default value for RICK is calculated based on our internal credit rating of RCI Hospitality Holdings, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of RCI Hospitality Holdings.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of RICK stock the variable cost ratio is equal to 75.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12 million in the base year in the intrinsic value calculation for RICK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.6% for RCI Hospitality Holdings.

Corporate tax rate of 27% is the nominal tax rate for RCI Hospitality Holdings. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the RICK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for RICK are equal to 174.7%.

Life of production assets of 10 years is the average useful life of capital assets used in RCI Hospitality Holdings operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for RICK is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $133 million for RCI Hospitality Holdings - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 10 million for RCI Hospitality Holdings is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of RCI Hospitality Holdings at the current share price and the inputted number of shares is $0.3 billion.

COMPANY NEWS

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▶ Bombshells along I-45 to reopen, sell alcohol under new agreement   [Jun-20-18 07:32PM  American City Business Journals]
▶ Restaurant Stocks Delivering the Gains   [Jun-08-18 02:25PM  Investopedia]
▶ RCI CEO Conference Call with Seeking Alpha Columnist   [May-25-18 10:07AM  PR Newswire]
▶ Top Ranked Momentum Stocks to Buy for May 22nd   [May-22-18 10:44AM  Zacks]
▶ RCI Hospitality: Fiscal 2Q Earnings Snapshot   [May-10-18 05:18PM  Associated Press]
▶ RCI Reports Strong 2Q18 Results   [04:05PM  PR Newswire]
▶ RCI Hospitality posts 1Q profit   [Mar-07-18 05:31PM  Associated Press]
▶ RCI Hospitality reports 4Q loss   [Feb-14-18 05:35PM  Associated Press]
▶ RCI Receives Anticipated Nasdaq Letter   [Jan-03-18 04:24PM  PR Newswire]
▶ RCI Extends Filing Date of Annual Report   [Dec-13-17 05:26PM  PR Newswire]
▶ /C O R R E C T I O N -- RCI Hospitality Holdings, Inc./   [Aug-16-17 11:30AM  PR Newswire]
▶ RCI Hospitality posts 3Q profit   [Aug-10-17 12:33AM  Associated Press]
▶ RCI to Report 3Q17 Results August 9, 2017   [Aug-02-17 09:00AM  PR Newswire]
▶ RCI Names BDO as Auditor   [Jul-17-17 09:00AM  PR Newswire]
Financial statements of RICK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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