Vail Resorts stock hits 7-year high
AVON” Market forces pushed Vail Resorts stock to the highest price ” $27.90 ” in more than seven years. At market close Tuesday the company’s stock closed at $27.70.
The run-up of stock price comes in advance of next month’s release of what is expected to be a very rosy third-quarter earning report after a healthy ski season at the company’s five resorts.
The reason for the 5 percent jump in price over two days may be less influenced by speculation than by market dynamics.
“Seventy-nine percent of this company is held by institutional investors and they know what’s going on,” said Fraser Horn of First and Main Investments in Edwards. “They’re not selling. There’s no stock to buy so it become simple supply and demand.”
A total of 123,000 of the company’s 35 million shares were traded yesterday, Horn said. That’s a bit beneath the 175,000 shares traded in an average day.
Investors holding the stock are probably looking to profit on the smoking hot real estate sales at the company’s four Colorado resorts and Heavenly on Lake Tahoe.
At Vail alone, the company has more then $500 million in real estate development it will be selling over the next five years.
In the last earnings report, company chief executive Adam Aron cheerily told stockholders and members of the press that much of that real estate can be sold at exceedingly profitable rates.
The company has been positioning itself to be a player in the red-hot hotel sales and acquisition market. Earlier this month the company sold the 345-room Vail Marriott Mountain Resort for $62 million. It paid $49 million for the property four years ago and also invested heavily in a major remodeling.
In January the company announced it has sold its 49 percent stake in the Ritz-Carlton, Bachelor Gulch. Earlier this month the company purchased full ownership of the Snake River Lodge in Jackson Hole, Wyo.
The proceeds of the sale of the Marriott should further boost the company’s bottom line during what typically is the most profitable quarter of the year.
At initial public offering Vail Resorts stock was selling for $22 a share. It hit an all-time high in 1998 of $32 a share, then plunged to a low of just under $11 a share following the Sept. 11 attacks. In the last year the stock has more than doubled in price.
After losing $8.5 million in 2002 the company refinanced its debt, cut more than $45 million in operating expenses and slimmed staff. In its second quarter earnings report released in March the company netted $32.2 million on $264.6 million of revenue.
“The true profit generator for this company is the real estate holdings,” Horn said. “Operations put cash flow on the financial statement and the profit is generated by the real estate.”
The price/earnings ratio of the stock ” it’s price relative to its return to investors ” is at 37.72. That’s prompted some investment experts to say the stock is overvalued. Investment professionals say the stock is more speculative than the Standard and Poor’s Index ” an industry standard “that Monday had a price/earning ration of 16.13.
The reverse of the price/earnings ratio shows the company is providing investors with a return of 2.7 percent ” about the same return as a no-risk, FDIC-insured certificate of deposit, investment advisor Richard Loth said in an earlier interview.
Vail Resorts had not declared a dividend to shareholders since initial public offering.
Staff Writer Cliff Thompson can be reached at 949-0555, ext. 450, or email@example.com.
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