Rick's Cabaret: Naughty by nature

Vice is nice. Sin is in.

Maybe that’s the philosophy driving investors to the stock of Rick’s Cabaret International, Inc. (Nasdaq:RICK). While shares hit an all-time high of $29.79 on Dec. 26, newcomers wonder if there still are profits to be made from this R-rated company charting a path in the mostly G-rated Nasdaq marketplace.

“Everybody comes to Rick’s,” goes the oft-quoted line about the nightclub in the classic Bogart film “Casablanca.” Label this Rick’s a little more risqué rather than wartime risky — and its entertainers wear a bit less clothing than what they did at Bogie’s place.

Shares of this self-labeled “premier operator of upscale gentlemen's clubs” could be had for under $2 in 2003; and under $3 in 2005. Just last August, Rick’s Cabaret traded as low as $7.51. But even after sinking in January into the $19 range, and back there again earlier this month, Rick’s could be gaining strength. The stock closed at $20.30 on Thursday.

The sole analyst who covers Houston, Texas-based Rick’s Cabaret, Eric Wold of Merriman Curhan Ford & Co., rates the stock a “buy,” and recently boosted his earnings outlook to $2 per share for fiscal 2009. Last month, the company raised its guidance for the fiscal year ending Sept. 30 to net income of $8.4 million, or $1.10 earnings per share, up from $7.7 million, or $1.03 a share. The company is looking for $55 million in sales, up $1 million from its December guidance.

Rick’s Cabaret, which runs 16 adult clubs under three brands, has few competitors as a U.S. public company. There’s Denver, Colo.-based VCG Holding Corp. (Nasdaq:VCGH), which operates 19 clubs and an upscale dance club under various names; and the much-smaller Scores Holding Co. Inc. (OTC:SCRH.OB), which has seven Scores clubs.

Rick’s Cabaret goes beyond the look-but-don’t-touch club scene. The company also operates adult websites, including a personals site for, let’s say, open-minded individuals, and an auction site where consumers can sell adult-oriented goods.

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