In its first quarter as a public company, Great Wolf Resorts (NASDAQ:WOLF) laid the groundwork for a potentially brilliant future of revolutionizing the lodging industry. Pioneers bear the burden of great risk while educating the marketplace, and in that sense, it's encouraging to see that Great Wolf expects to close out 2005 with a healthy dose of profitability.

That outlook contrasts with its latest showing. The fourth quarter wasn't spectacular, but it wasn't supposed to be. This is the seasonal lull for the operator of lodge-themed resorts with indoor water parks. Capacity peaks during the spring and summer, when families head out to the all-inclusive destinations. So if the 53.5% occupancy rate seems soft relative to the 65.3% rate it scored for the year, note that the quarter still showed improvement at three of the four resorts that were open in 2003.

With five resorts open and another two joining the pack later this year, Great Wolf has plenty of room to grow its lodging empire. Do you think traditional hoteliers like Marriott (NYSE:MAR), Starwood (NYSE:HOT), and Hilton (NYSE:HLT) will ever grow their properties by 40% in any given year? It won't happen without mergers.

Sure, imitators are already starting to take notice. The second Great Wolf resort opened four years ago in Sandusky, Ohio, and now Cedar Fair (NYSE:FUN) recently converted one of its resorts into Castaway Bay. Meanwhile, Kalahari is set to become the area's third indoor water park resort hotel this year.

Yet Great Wolf, as the industrious pioneer and first mover, will be chased for some time by the niche players. After producing a modest loss on just over $91 million in revenue this past year, the company is looking to earn between $0.25 and $0.33 a share in 2005.

So what do you call a company selling at nearly 100 times forward earnings and trading at eight times trailing revenues, while established hotel chains like Hilton, Starwood, and InterContinental (NYSE:IHG) are selling closer to three times their top-line showings?


Yes, cheap.

If David Gardner's Rule Breakers newsletter service has one resounding theme, it's that many of tomorrow's great stocks appear insanely overpriced today.

Great Wolf has indicated that it has the funds and cash flow in place to open two new resorts every year. At that rate, the company would more than double in size over the next three years. And in time, the number of annual additions would grow, too. Margins should only continue to improve as the company grows, and that means earnings will grow even faster than the speedy top line.

So, yes, Great Wolf is cheap today, even if it means you won't believe me until tomorrow comes.

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Longtime Fool contributor Rick Munarriz thinks that Great Wolf's resorts would also do really well in the South. While the warmer climate there may have some folks longing for outdoor water attractions, the quirky weather in some parts -- like his park-less homestead of Miami -- would devour the concept. His portfolio fancies thrills: He owns shares in Great Wolf and units in Cedar Fair. 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.