Diego Stendardo

Rick's Has Great 2008, but Fails to Provide Guidance

Great article Chris. I have opened a small position in Rick, taking advantage of the current stock price. Rick is a company i have been following for some time, but it only makes up a small portion of my current portfolio. My two cents:

1. I've run a DCF model like you did with similar numbers this summer, and i came to the conclusion that when it was trading around 15 it was overvalued. Even if we don't factor horrible numbers like yours, the stock's intrinsic value is, as of now, not higher than $8 - 9 per share IMHO. Moreover, the put options lingering, reckless acquisitions and the coming recession are pushing down the price even further.
Also, i didn't like some of Eric's answers during the CC; he gave me the impression he was too vague and insecure, too many 'i don't know how we're going to deal with that' and 'we'll figure that out'. JMHO.

2. I was expecting some acquisitions abroad in 2008, considering the company is called Rick's Cabaret International, but i see no international business. In hindsight, it was much better if they used the cash to buy a couple of clubs in growing markets like Brazil, in the financial capital Sao Paulo, Mexico or China, maybe in Shanghai. Diversifying outside of the US could have been a great move, but maybe Rick's is still too small to handle international business.