Vail Resorts’ stock hits 7-year peak
AVON Good snow and an unprecedented demand for real estate is helping drive the price of Vail Resorts stock to levels it hasnt seen since 1998.The companys stock was trading as high as $25.90 a share a huge leap from the trading price of $13.73 a share last May. At market close Monday, the stock was selling for $25.79.The companys stock at initial public offering in 1997 was $22 a share. A recession compounded by terrorism drove the stock below $11 a share after Sept. 11.The company restructured, slimmed staff, cut $45 million in expenses and refinanced its debt saving $5 million annually in interest expense. All of this helped propel it to the most profitable second quarter in its history. The company is reporting net income of $32.2 million on revenue of $264.6 million for its second quarter, which covers the beginning of the ski season. Thats a turnaround from the same period last year when it lost $6.7 million after a one-time refinancing charge.Chief executive Adam Aron has also hinted broadly that the hot hotel market could allow the company to sell some of its hotels for a huge profit. Last December the company sold its 49 percent stake in the Ritz-Carlton Bachelor Gulch.P/E and dividendsDespite the stocks price surge, it is overvalued for what it gives investors relative to its performance, according to some industry standardsThe stock is carrying a price/earnings ratio approaching 34 or 35 high by industry standards meaning it is more speculative than, say, the Standard & Poors 500, which carries an average price earnings ratio of 20, said Richard Loth, an investment adviser and columnist for the Vail Daily.The reverse of the price/earnings shows the stock is providing investors with a return of 2.6 percent about that of a no-risk, FDIC-insured certificate of deposit, Loth said.Vail Resorts has not paid a dividend since initial public offering in 1997.
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