Diamond Hill Capital Above 5% of Steiner Leisure

Page 1 of 2

Ric Dillon’s Diamond Hill Capital has reported ownership of about 770,000 shares of Steiner Leisure Limited (NASDAQ:STNR) or 5.3% of the company, according to a filing with the SEC. Diamond Hill had owned a little over 700,000 shares at the end of September per its 13F filing for the third quarter of 2012 (see more of Dillon’s stock picks). Steiner is a spa and beauty services company; it sells beauty care products, operates personal care schools, and provides services on cruise ships, at resorts, and at beauty facilities. The market capitalization is about $670 million, but with an average of about 50,000 shares traded daily and a current share price of over $45 there is over $2 million in daily dollar volume.

Revenue was up 14% in the third quarter of 2012 compared to the same period in 2011, led by growth in services. This was in line with trends from the first half of the year. Margins contracted a bit but Steiner Leisure Limited still produced 7% growth in net income, and thanks to share buybacks earnings per share came in at 85 cents versus 77 cents a year earlier. However, nearly all of the company’s growth seems to have come from acquisitions of laser hair removal facilities in the United States, rather than from organic factors. Additional revenue growth came from the acquisition of some beauty schools. As a result these headline growth rates overstate the prospects of the business. We would expect that sales and earnings will be flat at best barring substantial changes in market demand. Currently the largest segment is spa operations, responsible for 63% of revenue in Q3 2012.

Steiner Leisure Limited trades at 13 times trailing earnings, and we would say that the trailing period is composed almost entirely of time that the recent acquisitions were contributing to the bottom line. The current-year P/E is 12 as Wall Street analysts agree that growth will be minimal. It’s possible that the company will continue to generate EPS growth through buybacks even if earnings remain flat- Steiner appears to only need about a third of cash flow from operations for capital expenditures- but we’d rather not rely on that point. In addition Steiner does not appear cheap in terms of cash flow metrics: the EV/EBITDA multiple is 9.0x.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!