Starboard Adds Shares of Regis

The company’s closest peer is Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA), though that company is primarily a retailer with a side business as a salon services provider. Ulta Salon also looks pricy, at 40 times trailing earnings. It has been experiencing high growth in revenue and earnings, however, and given that much of its products and services are likely higher-end than Regis’s we can see why the company would trade at a premium. Still, in absolute terms it’s challenging to see a value case for a stock with a forward P/E of 28- how much further can the company actually grow its net income?

We can also compare Regis to Steiner Leisure Limited (NASDAQ:STNR), a provider of spa services and personal care products, and to Weight Watchers International, Inc. (NYSE:WTW). Each of these stocks carries a trailing P/E multiple of 13, placing them in more conventional value territory in that regard. Weight Watchers has been struggling, with earnings down last quarter versus a year earlier, but it might be worth a look- we’d certainly expect the market demand to continue to increase. Steiner actually combines its multiple with a decent financial performance: in the third quarter, revenue was up 14% compared to the same period in 2011 and earnings rose 7%. Its market cap is only about $690 million but we think that it could prove a good value opportunity, particularly considering the high multiples we find in Ulta Salon and Regis.