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Why OneSpaWorld Holdings Stock Popped 11.5% in March

By Beth McKenna – Apr 6, 2019 at 3:20PM

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This March IPO, which operates health and wellness centers on cruise ships and at destination resorts, made a splash with investors.

What happened

Shares of OneSpaWorld Holdings (Nasdaq: OSW), a leading provider of health and wellness products and services on board cruise ships and in destination resorts, jumped 11.5% in March, according to data from S&P Global Market Intelligence. That's a better gain than it might initially seem since the stock just began trading on March 21. 

Through April 5, OneSpaWorld stock is up 12.2% since its initial public offering (IPO). 

For context, the S&P 500 index returned 1.9% last month, and is in the red nearly 1% over the time period that OneSpaWorld stock has traded.

Close-up of a woman's face and head, with her hair covered with white terry cloth, as she gets a facial massage.

Image source: Getty Images.

So what

We can attribute OneSpaWorld Holdings stock's rise in March to investor optimism about the growth prospects for the newly publicly traded company. Enthusiasm was likely stoked late in the month when two Wall Street firms -- Stifel Nicolaus and Nomura  -- initiated coverage of the stock with buy ratings. 

Solid growth projections for for the cruise industry underpin investor and Wall Street optimism. The industry is projected to continue to grow in 2019 with an estimated 30 million travelers expected to cruise, up 6% from 2018, according to Cruise Lines International Association (CLIA). 

OneSpaWorld's products and services include offerings in the spa and beauty, medical spa, fitness, health, nutrition, mind-body, and spiritual categories. The company touts that it's the dominant player in the outsourced health and wellness market at sea. Its customers include all the major cruise lines, such as Royal Caribbean, Princess, Carnival, Disney, and Norwegian. At the end of the third quarter of 2018, it had a presence on 161 ships, which equated to a more than 80% market share (by daily passenger capacity), according to its January 2019 investor presentation. It also had operations at 67 destination resorts worldwide.  

Now what

OneSpaWorld projects it will grow revenue and earnings per share (EPS) at 12% and 31% compound annual growth rates (CAGR), respectively, from 2018 to 2020.

In 2019, Wall Street expects the company to post EPS of $0.05 on revenue of $577 million. For 2020, the Street is modeling for revenue and EPS growth of 16.5% and 56%, respectively, year over year. That said, investors should place even less confidence than usual on the Street's expectations since only two analysts have contributed to the consensus earnings estimates and just one analyst's estimate makes up the "consensus" revenue projections.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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