Regal Entertainment Will Keep Smashing It

The nation's leading theater chain can grow via acquisition and its expanding customer-oriented product innovations. With rising ticket prices anchoring the box office growth, there's little not to love.

May 2, 2014 at 3:19PM

There's a lot to love about Regal Entertainment (NYSE:RGC). The largest theater operator in the United States offers compelling growth in a mature market via ancillary revenue streams and bolt-on acquisitions. Beyond its appeal to growth investors, the company pays a very attractive dividend, and investors can pick up a piece of this well-managed, industry-leading business for 14 times forward estimated earnings. The movie industry can be risky, but the box office continues to be one area where the numbers only seem to rise. With the summer blockbuster season on tap, Regal Cinemas has even brighter days ahead.

The results are in
Though the generally accepted accounting principles bottom line actually came in at a loss, Regal Cinemas' first-quarter results proved hardy. The company grew revenue by 13% and adjusted EBITDA by 19.8%, while also growing free cash flow. The acquisition of the 500-plus screen Hollywood Theaters, priced at $238 million (and only $191 million in cash) looks to have been a great use of capital. http://www.businesswire.com/news/home/20130219006305/en/Regal-Entertainment-Group-Announces-Agreement-Acquire-Hollywood#.U2PY8a1dXfg 

Even though the box office ticket prices have been steadily increasing over the long term (receipts grew 7.5% in the most recent quarter), the mature U.S. theater market requires that the big players turn to nonorganic factors to drive growth. As a well-capitalized industry behemoth, Regal remains in top position to benefit from the trend of consolidation and market share grabs.

Regal noted higher ticket sales due to a strong slate of family oriented films. The top 10 grossing films for the quarter included three animated family films. Clearly, fun for the whole family equates to good times for the theater chains. The broader growth driver for box office revenue, though, is premium experiences that yield premium ticket prices. IMAX screens, 3-D films, and a shift to all-digital projection systems have allowed Regal to charge more for each ticket. At various times in the past, that has more than compensated for lower ticket sales.

Coming soon
As has been the case for some time, Regal is focusing on continued screen acquisition at the macro level and customer-experience refinements on the unit level. Concessions remain a high-growth area for the business, with sales increasing by nearly 17% in the most recent quarter. Regal has expanded its food and beverage offerings to address a more discerning consumer, and the result is higher margins with low up-front investment for additions such as alcoholic beverages.

Regal is also installing larger, more comfortable seats in theaters that have been through the majority of their useful life -- a minimal capital investment that can extend the life of the asset.

On the film end, we are headed into summer blockbuster season. With (unfortunately) another round of superhero movies on the way, alongside plenty of sequels, the box office will be raking it in. Investors will want to keep an eye on how these films perform, especially 3-D and IMAX ticket sales. Concession sales should continue their upward trajectory nicely, and the company is working on opening seven to nine new theaters with a net screen addition in the neighborhood of 20-40.

All in all, things look great for this well-priced, 4.7% dividend-paying stock. Investors compelled by relative low-risk, income-generating picks should take a close look.

Will this stock be your next multibagger?
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers