This Stock Is at the Top of My List

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Have you ever been on a cruise? I haven't. I'm not sure why really, the stars just haven't aligned. But not long ago when I ran across Steiner Leisure (Nasdaq: STNR  ) , it got me thinking not only about taking a cruise one day -- but also how I could pay for it.

Everybody look at me cause I'm sailin' on a boat
Steiner Leisure isn't a cruise line; it's even better. The company provides spa services and products worldwide on both sea and land with services on 151 cruise ships and 70 land-based locations carrying Steiner products and spas.

Its contractual relationships with cruise lines typically last one to six years versus land-based agreements that offer a bit of a longer stint, but the big ships are where it's at. Ships with large spa facilities provided average weekly revenues of $60,000, close to four times the revenue generated from the smaller ships.

This boat is real
With a market cap of just over $600 million, Steiner has a balance sheet that makes me feel as relaxed as a day at the spa, too. With more than $50 million in cash and short-term investments and no debt, the company doesn't have any concerns on that front. And the fact that insiders own 10% of the shares tells me that they are interested in seeing the business do well.

And do well it has. From 2001 to 2010, Steiner grew top line revenue at a compound annual rate of 12.6%, and I believe that as the economy slowly pulls itself out of the doldrums, there is still plenty of room left to run with a docket of new and bigger ships slated to enter into the market through 2014.

It's a big blue watery road
According to Cruise Lines International Association, worldwide passenger growth has grown from 3.7 million in 1990 to 13.5 million in 2009, representing 7.2% annual growth. Now to be fair, that growth rate has slowed down slightly over the past decade, but not by much. And it's also a fact that more passengers are taking longer cruises. The longer people are on the ships, the more apt they are to pamper themselves with a trip (or two) to the spa.

Don't you ever forget
Of course, the biggest risk to a company like this is the health of the consumer and the overall economy. If we continue to go through a long, dragged-out kind of "recovery" that doesn't gain any real traction, then I just can't imagine that folks are going to be lining up to get on the boat.

I think, though, that this is a bigger risk for the cruise lines themselves like Carnival (NYSE: CCL  ) , Royal Caribbean Cruises (NYSE: RCL  ) and even Disney (NYSE: DIS  ) . They're the ones who need to offer deals and discounts to get people on the boats. But once they're on, they're on, and the chances are better that they'll go ahead and splurge for the spa treatment seeing as they're already there.

Take a good hard look
I started looking at Steiner back in July when shares climbed up past $51. While I don't place myself in the value investor camp, it was still too rich for my blood then. But an earnings release and some good old-fashioned market turmoil has brought this one down to a level that looks a lot more enticing to me today, and I'm really considering adding it to my Rising Star portfolio. So what's stopping me? Swing on by my discussion board and convince me not to miss the boat (or that this ship has sailed).

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).

Stock Advisor analyst Jason Moser owns no shares of any companies mentioned. Motley Fool newsletter services have recommended buying shares of Walt Disney. 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.


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