Vail Resorts Keeps Climbing Mountains
A good start to the prime ski season suggests the ski-resort operator’s stock still has more room to run.
Mother Nature can be fickle, something ski-resort operator Vail Resorts Inc. knows all too well. But a snowy start to the prime ski season suggests Vail’s recent run is poised to continue.
The stock has nearly quadrupled in value over the past four years, far outpacing the S&P 500. And the slope has gotten even steeper of late, with shares rising more than 20% since the end of September to record highs. As Vail prepares to report fiscal first-quarter results Monday, investors shouldn’t jump off the lift just yet.
Vail’s latest ascent has coincided with snowstorms that already have blanketed Colorado, Utah and Lake Tahoe—ski regions that suffered through an unusual dry spell last year. While Vail managed to weather the weather, management guidance for the current ski season will be critical.
Analysts project a loss of $1.75 a share for the period ended in October, due to the seasonality of Vail’s business. More important, Wall Street has actually gotten more upbeat ahead of the results. A year ago, analysts expected a loss of $2.04 a share for this period. Meanwhile, fiscal 2016 revenue is expected to rise 10% from a year ago, continuing its upward trajectory, while earnings are expected to increase 16%.
Vail has benefited from a recent buying spree. It acquired Park City Mountain Resort in Utah last year, giving it the biggest ski resort in the U.S. Additionally, Vail bought a resort in Australia this summer, which should help bolster its results during its typical off-season periods.
Vail also may find itself relatively insulated from tepid U.S. consumer spending given its affluent clientele. Visitors at Vail’s properties have average yearly household income of nearly $300,000, according to the company. That is important considering Vail raised season-ticket prices this year by between 3.5% and 5.5%.
Despite Vail’s big rally, the stock looks relatively reasonable for a company that increased earnings at a 24% compound annual rate in the past six years. Shares trade at about 32 times projected earnings for the next 12 months, or about half the multiple it sported two years ago.
Vail has yet to hit its peak.