Steiner Leisure (NASDAQ:STNR)
Trading at $34.26 as of 2/10/05

If you have always enjoyed the concept of investing in the shovels over the mines, why not fancy the massage oil and aromatherapy over the booming cruising industry and the growing appetite to be pampered while at sea?

Steiner Leisure, up 40% since being singled out in November in our Rule Breakers newsletter service, runs the floating spas on 114 of the most popular cruise ships setting sail in this country. Carnival (NYSE:CCL), Disney (NYSE:DIS), NCL, Royal Caribbean (NYSE:RCL)? They have all turned to Steiner to operate their lucrative onboard spas.

The results have been amazing, and the only thing that Wall Street has consistently done is underestimate the growing company's potential. Steiner has topped estimates for 10 consecutive quarters -- coming ahead by at least $0.03 a share during each of the last four periods -- and has history and momentum on its side as it aims to stretch that streak to 11 quarters when it reports its December quarter results later this month.

While Steiner also runs a prolific chain of spa training schools (which naturally comes in handy when it's time to ferret out the worthy for its own fleet) as well as manning several dozen spas at resort hotels (for the pampered landlubbers), it's the shipboard operations that are truly exciting.

Even as a tenant, Steiner has been able to achieve net margins of 10% while earning $1.88 a share over the past four quarters. Despite the gains that Rule Breakers subscribers have enjoyed in recent months, the stock is still fetching a reasonable price of just 17 times trailing earnings.

The obvious concern is that a company sporting those kinds of numbers as a floating tenant may inspire the greed of the landlord. Why shouldn't the cruise lines run the spas themselves? Well, some have tried. Just recently Carnival's Princess line hired a top-notch spa manager to take two of its ships in-house. After realizing that both of its Love Boats were sorely underperforming its Steiner-run ones, the in-house manager resigned and Princess gave up on the experiment and handed the two vessels back to the proven hands of Steiner.

Steiner's earnings have risen by 42% through the first nine months of 2004. The cruise industry is booming, and the trends are favoring Steiner's literal and figurative handiwork. Once the travel of choice for seasoned retirees sailing out of Florida's ports, updated ships are drawing a younger crowd setting sail from ports all over the country.

That plays right into the company's oiled hands. Another notable trend is that more men are going in for spa treatments. That is strictly incremental; Steiner has seen its male patrons grow from 10% of its business to 20% -- and growing -- in recent years.

With favorable tailwinds coming in so many different directions, can things get any better? Definitely. Earlier this month Royal Caribbean reported that bookings for 2005 were running well ahead of last year, and with eventual passengers willing to pay more for their berths. Steiner is no doubt cracking its knuckles in anticipation.

The company has also been able to take advantage of its growing client base to grow its retail distribution business. From its popular home spa products to its attractive online storefront, Steiner is growing in so many different ways.

Wall Street has shown a knack for missing out on the Stiener growth story. Don't make the same mistake.

So where do you want to sail from here?

Longtime Fool contributor Rick Munarriz has experienced Steiner's prominence firsthand while on the Disney Wonder. He does own shares in Disney. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.