3 Leisure Stocks Pushing Industry Growth

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 305 points (1.8%) at 17,666 as of Tuesday, Feb. 3, 2015, 4:20 PM ET. The NYSE advances/declines ratio sits at 2,499 issues advancing vs. 614 declining with 98 unchanged.

The Leisure industry as a whole closed the day up 1.5% versus the S&P 500, which was up 1.4%. Top gainers within the Leisure industry included Canterbury Park ( CPHC), up 1.8%, Luby's ( LUB), up 5.7%, Flanigan's ( BDL), up 3.2%, RCI Hospitality Holdings ( RICK), up 2.0% and Morgans Hotel Group ( MHGC), up 1.9%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Morgans Hotel Group ( MHGC) is one of the companies that pushed the Leisure industry higher today. Morgans Hotel Group was up $0.14 (1.9%) to $7.39 on average volume. Throughout the day, 96,120 shares of Morgans Hotel Group exchanged hands as compared to its average daily volume of 84,100 shares. The stock ranged in a price between $7.20-$7.39 after having opened the day at $7.29 as compared to the previous trading day's close of $7.25.

Morgans Hotel Group Co. operates as an integrated lifestyle hospitality company that operates, owns, acquires, develops, and redevelops boutique hotels, nightclubs, restaurants, bars, and other food and beverage venues. Morgans Hotel Group has a market cap of $246.5 million and is part of the services sector. Shares are down 7.5% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate Morgans Hotel Group a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Morgans Hotel Group as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on MHGC go as follows:

  • Net operating cash flow has significantly decreased to -$1.70 million or 216.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • MHGC has underperformed the S&P 500 Index, declining 6.83% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • MORGANS HOTEL GROUP CO has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MORGANS HOTEL GROUP CO continued to lose money by earning -$1.79 versus -$2.14 in the prior year. For the next year, the market is expecting a contraction of 5.0% in earnings (-$1.88 versus -$1.79).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 1.8% when compared to the same quarter one year prior, going from -$10.33 million to -$10.14 million.

You can view the full analysis from the report here: Morgans Hotel Group Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, RCI Hospitality Holdings ( RICK) was up $0.20 (2.0%) to $9.94 on light volume. Throughout the day, 23,618 shares of RCI Hospitality Holdings exchanged hands as compared to its average daily volume of 56,800 shares. The stock ranged in a price between $9.71-$9.99 after having opened the day at $9.71 as compared to the previous trading day's close of $9.74.

RCI Hospitality Holdings, Inc., through its subsidiaries, owns and operates nightclubs that offer live adult entertainment, restaurant, and bar services primarily for businessmen and professionals in the United States. RCI Hospitality Holdings has a market cap of $101.0 million and is part of the services sector. Shares are down 2.8% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate RCI Hospitality Holdings a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates RCI Hospitality Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from TheStreet Ratings analysis on RICK go as follows:

  • The revenue growth greatly exceeded the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 19.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • RCI HOSPITALITY HLDGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, RCI HOSPITALITY HLDGS INC increased its bottom line by earning $1.11 versus $0.97 in the prior year.
  • The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.31 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, RCI HOSPITALITY HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • RICK has underperformed the S&P 500 Index, declining 9.07% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

You can view the full analysis from the report here: RCI Hospitality Holdings Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Luby's ( LUB) was another company that pushed the Leisure industry higher today. Luby's was up $0.28 (5.7%) to $5.24 on heavy volume. Throughout the day, 96,487 shares of Luby's exchanged hands as compared to its average daily volume of 22,300 shares. The stock ranged in a price between $4.92-$5.33 after having opened the day at $4.97 as compared to the previous trading day's close of $4.96.

Luby's, Inc., through its subsidiaries, operates as a multi-brand restaurant company in the United States. The company operates in three segments: Company Owned Restaurants, Franchise Operations, and Culinary Contract Services. Luby's has a market cap of $139.3 million and is part of the services sector. Shares are up 9.0% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate Luby's a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Luby's as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from TheStreet Ratings analysis on LUB go as follows:

  • The revenue growth came in higher than the industry average of 10.8%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LUB's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.14 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • LUBYS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LUBYS INC swung to a loss, reporting -$0.05 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($0.04 versus -$0.05).
  • The gross profit margin for LUBYS INC is currently extremely low, coming in at 11.11%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.47% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$4.33 million or 209.82% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: Luby's Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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