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Vail: Reaching New Heights

Using my pre-screen qualifications, I continue my hunt for a stock my colleagues might consider for Motley Fool Hidden Gems status. While schussing over the powder and busting out an alley-oop flat spin 540, I stumbled upon a black diamond in the rough in Vail Resorts (NYSE: MTN  ) .

Mutual fund manager Ron Baron has owned Vail for a long time and currently holds 12% of the company's shares. The folks over at Royce also hold 1.2% of the shares. That was enough to get me interested. The company owns four ski resorts in Colorado -- one in Lake Tahoe and three in Grand Teton National Park -- and a golf and tennis club in Jackson Hole, Wyo. Following in the footsteps of Four Seasons (NYSE: FS  ) , it also owns a majority interest in a luxury hotel management company (think high margins). It also develops, buys, and sells real estate near its resort communities. And real estate diversification is always a great thing.

Competition? Plenty. Even if you're a skier, you may choose a private resort, or one operated by Intrawest (NYSE: IDR  ) . If it's a luxury vacation you want, perhaps you want a timeshare like Bluegreen Resorts (NYSE: BXG  ) or the glorious properties at Four Seasons. Or perhaps Motley Fool Rule Breakers pick Great Wolf Resorts (Nasdaq: WOLF  ) is more your style.

Estimated analyst earnings for '05 are $0.64, and they're at $0.90 for '06. At a price of $28.00, its P/E based on current-year expectations is 44, and its forward P/E is 31. That's a PEG of 1 (measuring growth based on estimated current-year expectations and '06 expected earnings and estimated current-year P/E), so it seems fairly priced, despite heady growth expectations.

Onward to our Hidden Gems criteria.

  • Market cap of less than $2.5 billion? YES. $1 billion.
  • Historical and projected earnings growth of 15%? Sort of: 41% next year (the baseline being estimated current-year expectations and '06 expected earnings), 12% over five years.
  • Free cash flow positive? No. FCF is negative, but for good reason -- expansion!
  • MC/FCF less than P/E? N/A.
  • MC/FCF/5-year growth rate under 0.66? N/A.
  • Debt 20% of equity and reasonable? No: 90.31%.
  • Net profit margins greater than 7%? Nope: 3.01% (on a trailing-12-month basis).
  • Insider ownership of 20%-50%? Oops, only 1%.

OK, not a Hidden Gems candidate by my standards. But Vail is still a very intriguing business to me. The company is the possessor of top-shelf real estate and, to its merit, seems intent on purchasing/managing a lot more.

For more powder-fresh Foolishness on Vail Resorts, check out these Takes:

Fool contributor Lawrence Meyers owns no stocks mentioned in this article, although he is always searching for a diamond in the rough. Don't listen to him, though. Do your own research!

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 03, 2013, at 1:16 PM, rosiew wrote:

    Most timeshare companies are taking advantage of people, often those who are more vulnerable and less able to resist hard sales tactics. I have heard of many cases where maintenance costs rise well above inflation. It would appear the timeshare companies lock people into contracts and then drive up their profits though increased maintenance charges. It would be good to see legislation whereby timeshare companies can only charge "reasonable" maintenance costs and not use this annual fee to fleece people's bank accounts:

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Related Tickers

4/2/2013 4:05 PM
BXG.DL $9.96 Down +0.00 +0.00%
Bluegreen Corp CAPS Rating: ***
MTN $156.12 Down -0.15 -0.10%
Vail Resorts CAPS Rating: ****
WOLF.DL $0.00 Down +0.00 +0.00%
Great Wolf Resorts CAPS Rating: *