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RCI Hospitality (RICK) Soars to 52-Week High, Time to Cash Out?

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Shares of RCI Hospitality Holdings (RICK - Free Report) have been strong performers lately, with the stock up 24.6% over the past month. The stock hit a new 52-week high of $83.16 in the previous session. RCI Hospitality Holdings has gained 2.9% since the start of the year compared to the 0.5% move for the Zacks Consumer Discretionary sector and the 2.3% return for the Zacks Leisure and Recreation Services industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on December 14, 2021, RCI Hospitality reported EPS of $1.58 versus consensus estimate of $0.67.

For the current fiscal year, RCI Hospitality is expected to post earnings of $4.98 per share on $263.34 million in revenues. This represents a 22.06% change in EPS on a 34.87% change in revenues. For the next fiscal year, the company is expected to earn $5.72 per share on $290.22 million in revenues. This represents a year-over-year change of 14.86% and 10.21%, respectively.

Valuation Metrics

RCI Hospitality may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

RCI Hospitality has a Value Score of D. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 16.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 15.9X versus its peer group's average of 15.9X. Additionally, the stock has a PEG ratio of 1.34. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, RCI Hospitality currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if RCI Hospitality passes the test. Thus, it seems as though RCI Hospitality shares could have potential in the weeks and months to come.


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