RCI Hospitality has moved up 60% since the last time I looked at the company (Last August) but this company hasn't nearly topped out yet. I expect this company to double again in the next 18 months and continue on from there. And it's all the result of two things, (1) management finally brought several MBAs to help manage the company and (2) their decision to expand their restaurant chain "Bombshells" beyond Texas. It's a move to take everything the company has learned in entertainment and food service from a very specific niche market to a mass audience based around a military theme. It seems so obvious that you just have to wonder why nobody else ever thought of it.
For some investors an investment in RCI Hospitality may not be suitable because of the type of business the company has traditionally been involved in, but they know the food and entertainment markets and their audience, and the company makes a lot of money. In 2013 they opened Bombshells Restaurants to appeal to the same demographic that Hooter's, the Tilted Kilt, Bone Daddies, Bikini's and Twin Peaks appeal to. And so far it's been a success.
RCI Hospitality Holdings, Inc. owns and/or operates upscale adult nightclubs serving primarily businessmen and professionals in the United States. The company operates in two segments, Nightclubs and Bombshells Restaurants and Bars. It operates adult nightclubs under the Rick's Cabaret, Tootsie's Cabaret, Club Onyx, XTC Cabaret, Cabaret East, Cabaret North, Silver City, Downtown Cabaret, Temptations, Jaguars, The Black Orchid, Seville, and Down in Texas Saloon. The company also operates five sports bar/restaurants under the Bombshells name. As of March 10, 2016, it operated 43 units. In addition, the company owns a national industry convention and tradeshow; 2 national industry trade publications; 2 national industry awards shows; and approximately 25 industry Websites, as well as publishes trade magazine serving the adult nightclubs industry. 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.
(Summary) (Company) (Chart)
| 1 January 2017 Price $16.81 1yr Target $27.00 Analysts 1 Dividend $0.12 Payout Ratio 10.43% 1yr Cap Gain 60.61% Yield 0.71% 1yr Tot Return 61.32% P/E 14.60 PEG 0.37 Beta 0.54 | EPS (ttm) $1.15 EPS next yr $1.79 Forward P/E 9.89 EPS next 5yr 40.00% 1yr Price Support $71.60 Market Cap $163.39 Bil Revenues $135.10 Bil Earnings $11.40 Mil Profit Margin 8.43% Quick Ratio 1.10 Current Ratio 1.20 Debt/Equity 0.82 | 1yr RevGR -0.37% 3yr RevGR 6.25% 5yr RevGR 10.06% 1yr EarnGR 22.22% 3yr EarnGR 4.59% 5yr EarnGR 6.84% 1yr DivGR 0.00% 3yr DivGR --- 5yr DivGR --- ROA 4.10% ROE 8.90% |
 RCI Hospitality Monthly Chart |  RCI Hospitality Dividend History |
Operations
RCI Hospitality Holdings, Inc. subsidiaries own and operate upscale gentlemen's clubs and upscale casual dining restaurants. In addition, the company operates several websites and a media division.
Founded in 1983, the Rick's Cabaret pioneered the creation of elegant gentlemen's clubs featuring beautiful topless dancers and high quality restaurant service. Since going public in 1995 the company has transformed itself into a leading hospitality holding company. The company's subsidiaries own and operate over forty establishments under multiple brands throughout the US. The company changed its name from Rick's Cabare to RCI Hospitality Holdings, Inc. in 2014.
RCI Hospitality Holdings, Inc. subsidiaries own and operate upscale gentlemen's clubs and upscale casual dining restaurants. In addition, the company operates several websites and a media division.
Founded in 1983, the Rick's Cabaret pioneered the creation of elegant gentlemen's clubs featuring beautiful topless dancers and high quality restaurant service. Since going public in 1995 the company has transformed itself into a leading hospitality holding company. The company's subsidiaries own and operate over forty establishments under multiple brands throughout the US. The company changed its name from Rick's Cabare to RCI Hospitality Holdings, Inc. in 2014.
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RCI Hospitality's subsidiaries have built powerful brand name awareness for their upscale environments and exceptionable adult entertainment. Many of the performers eventually went on to become Playboy Playmates and Penthouse Pets.
Forbes named RCI Hospitality Holdings one of America's 200 Best Small Companies. The company has also been profiled in The Wall Street Journal, Fortune, MarketWatch, Corporate Board Member, Smart Money, USA Today, The New York Daily News and other publications. The Rick's Cabaret-NYC Steakhouse is listed in Zagat's New York Nightlife and included in the TONY 100 list of fine Manhattan dining establishments by Time Out New York.
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RCI Hospitality's decision to create the casual dining concept around upscale casual dining and a military environment as well as starting a dividend in March 2016 has stabilized the company's financials and provided sufficient confidence to allow investors to begin to become shareholders.
The Path Forward
With 4 Bombshells Restaurants open and more coming in 2017, RCI Hospitality is evolving into an upscale restaurant business. Any investment in the company is an investment in what the company is transitioning into rather than what it currently is. But don't get me wrong. I don't see the adult entertainment side of the business disappearing, I just anticipate a huge expansion on the casual dining aspect of the company. With the expectation that the company will expand from it current 4 locations in Texas to 100 locations spread across the country, these shares should double and triple over time.
So why is this happening? I believe it's a direct result of the company changing from a niche product company to one that's going after a bigger audience. In addition, it's a direct consequence of bringing into management more responsible businessmen who are adding structure and discipline to the company. And I expect the company to now be more responsible to their shareholders.
With 4 Bombshells Restaurants open and more coming in 2017, RCI Hospitality is evolving into an upscale restaurant business. Any investment in the company is an investment in what the company is transitioning into rather than what it currently is. But don't get me wrong. I don't see the adult entertainment side of the business disappearing, I just anticipate a huge expansion on the casual dining aspect of the company. With the expectation that the company will expand from it current 4 locations in Texas to 100 locations spread across the country, these shares should double and triple over time.
So why is this happening? I believe it's a direct result of the company changing from a niche product company to one that's going after a bigger audience. In addition, it's a direct consequence of bringing into management more responsible businessmen who are adding structure and discipline to the company. And I expect the company to now be more responsible to their shareholders.
But I'm not naive enough to think that things will change overnight. They've got to work through ownership vs franchising and their ability to find the right individuals during expansion. None of these things are easy, and most are time consuming. But I think the company is moving in the right direction and that's been shown by the rise in the price of the stock and the initiation of a dividend for shareholders.
As noted above, this isn't the first time I've reviewed RCI Hospitality. I already have a position in this company and I'm growing it through dividend reinvestment and the sale of options. It's a great strategy that gets me into stock at the right price and thens adds income back into my account for further acquisition of shares. But I expect to significantly add to my position over the next few weeks and months. This is a long term hold for me because this isn't going to happen overnight but the direction the company is moving in is correct. And I want to own shares of companies that are making all the right moves.
As noted above, this isn't the first time I've reviewed RCI Hospitality. I already have a position in this company and I'm growing it through dividend reinvestment and the sale of options. It's a great strategy that gets me into stock at the right price and thens adds income back into my account for further acquisition of shares. But I expect to significantly add to my position over the next few weeks and months. This is a long term hold for me because this isn't going to happen overnight but the direction the company is moving in is correct. And I want to own shares of companies that are making all the right moves.
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