Pretty darn good, as a matter of fact, judging by the data presented in our Fool by Numbers feature. Let's begin at the top line, where Rick's saw a jump of 65% in terms of net sales revenue. Operating income increased by a factor of 10. In net, Rick's earned $0.35 per share, reversing a year-ago loss of $0.05 per share. Rick's enjoyed all these numbers despite an expansion in its outstanding share count.
Everything about the year was fabulous. The company's margins improved. Management effectiveness, as measured by return on equity and return on assets, was in the negative column last year, while this year it was firmly on the positive side in both respects. Cash from operations increased 30%, and free cash flow was positive this year, since the company's need for capital spending decreased dramatically. In addition, the balance sheet appears to be faring well.
A double-digit increase in club comps partly drove this performance, appreciating by a spectacular 25%. Also, Rick's Web-property segment saw increases in its revenue and income flow. It's quite obvious that, at least for now, the company's strategy is working. Management apparently knows its business and is allocating capital resources correctly. Acquisition activity was significant in the last two fiscal years, but earnings and cash flow are up nonetheless.
Having just closed out a superb 2006, what will the next year bring for Rick's? According to company guidance, $0.48 per share is in the cards, which would represent growth of approximately 37% if Rick's can achieve it. As of this writing, the price of the stock sits at $6.86, creating a forward P/E ratio of 14.3. That's not a bad valuation for a business that has just come off a lofty fiscal year and is gunning for even more growth.
I think there could be more upside to this stock, considering its earnings and cash-flow trends. I also believe that adult entertainment will continue to grow over time -- sex will never stop selling, right? Adult entertainment and Wall Street certainly know each other -- aside from the well-known Playboy
Check out some more Foolish coverage on adult companies:
- Rick's Cabaret Looking Sexy: Fool by Numbers
- Stern's Revealing Influence
- Playboy Under Pressure
- Playboy's Strip Tease
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Fool contributor Steven Mallas owns none of the companies mentioned. As of this writing, he was ranked 3,011 out of 18,736 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.