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OneSpaWorld (OSW) Up 32% in a Year: What's Next for Investors?
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OneSpaWorld Holdings Limited (OSW - Free Report) rallied 32.2% in the past year compared with the Zacks Leisure and Recreation Services industry’s 3.1% growth. This success is on the back of the company’s innovation in offerings, expansion efforts and accretive collaborations.
The company is benefiting from a healthy demand environment. Also, strength in retail sales and pre-bookings are adding to the positives. OSW plans to unveil new and innovative products and services, empower its cruise ship staff (to deliver exceptional service), enhance efficiency (through technological upgrades) and secure new contracts to foster growth.
Image Source: Zacks Investment Research
What Makes the Stock Attractive?
Solid Cruising Demand: OneSpaWorld is thriving in a strong demand environment with innovative offerings and high operational standards. During first-quarter fiscal 2024, the company generated total revenues of $211.2 million, reflecting up 16% year over year. The upside was primarily led by the average ship count rising 9% year over year to 188. The onboard health and wellness centers played a significant role in this increase. The company's initiatives, such as enhanced pre-booking of guest services, improved onboard engagement, innovative service offerings and strict operational protocols, further boosted revenues and profitability.
Given the strong consumer demand and a proven strategy in place, the company raised its fiscal 2024 outlook. For fiscal 2024, the company now expects total revenues to increase by 10% year-over-year, in the range of $860-$880 million, up from a prior projection of $850-$870 million. Adjusted EBITDA is anticipated to increase by 12% year-over-year, reaching between $95 million and $105 million, up from a prior projection of $90 million to $100 million.
Accretive Partnerships: The company is benefiting from its focus on strategic partnerships, particularly through increased collaboration with cruise line partners, leading to higher productivity, revenue generation and profitability across its health and wellness centers.
During the fiscal first quarter, OSW made significant strides in expanding its partnership network, securing a new exclusive agreement with Royal Caribbean and Celebrity Cruises for their existing fleet of 40 ships and future vessels. OSW also added Aroya Cruises to its portfolio, where it will manage all health and wellness facilities starting in late 2024, reinforcing its strong market position and operational excellence. OSW anticipates managing approximately 198 vessels by the end of the fiscal 2024.
Strategic Initiatives: The company continues to expand its high-value offerings in health and wellness centers, including premium medi-spa, acupuncture and advanced facial services, leading to increased guest demand and spending. It also implemented pricing adjustments across its brands for core services.
During the fiscal first quarter, OSW achieved double-digit growth in key maritime operating metrics. This was supported by strategic initiatives to increase pre-booking, treatments per client and spa usage by passengers. These efforts are aimed at optimizing staffing, facilities and service capacities to enhance health and wellness center economics. The company simplified service menus and adjusted treatment approaches, driving higher revenue per guest through increased service frequency and a shift toward premium services and products.
Innovation in Offerings: The company is benefiting from its focus on advancing its service offerings and enhancing value through innovative approaches. OSW focused on introducing higher-value medi-spa and advanced facial techniques, necessitating specific equipment in treatment rooms and trained staff. With cruise line partners investing in enhanced health and wellness centers on new ships, the company is expanding these services, leading to a more profitable service mix.
The company continues to expand its service offerings, introducing new cryotherapy body and LED facial services alongside the ELEMIS BIOTEC 2.0 facial technology. The company has been rolling out LightStim therapy, enhancing its acupuncture services and notably boosting revenue in markets where this protocol has been implemented.
Valuation & Estimate Revision
The company’s earnings estimates for the fiscal 2024 suggest a growth rate of 28.6% from the year-ago period’s levels on a 10.4% revenue improvement. Its earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 4.7%. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
From a valuation standpoint, despite its forward 12-month price-to-sales ratio of 1.71X being above the industry average of 1.43X, the stock remains compelling for investors. This premium valuation is justified given the company's strategic efforts to enhance revenue growth and strengthen its market standing.
Conclusion
Although, the company’s valuation looks expensive its fundamentals are very solid. The company expects long-term benefits from the cruise industry's growth capacity, with 16 new ships expected from existing cruise line partners by the end of 2026. OSW is well-positioned to capitalize on this growth through strong partner relationships, current contracts, competitive operational infrastructure, a history of exceptional guest experiences, and a high contract renewal rate of approximately 97% in the past 15 years Investors might consider adding this Zacks Rank #2 (Buy) stock to their portfolios.
The consensus estimate for AGS’s 2024 sales and earnings per share (EPS) suggests growth of 7.7% and 5,200%, respectively, from the year-ago levels.
Adtalem Global Education Inc. (ATGE - Free Report) currently carries a Zacks Rank of 2. ATGE has a trailing four-quarter earnings surprise of 18.8%, on average. The stock has surged 101.9% in the past year.
The Zacks Consensus Estimate for ATGE’s fiscal 2025 sales and EPS indicates an increase of 8.3% and 16.4%, respectively, from year-ago levels.
Royal Caribbean Cruises Ltd. (RCL - Free Report) currently carries a Zacks Rank of 2. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has rallied 52.7% in the past year.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS calls for growth of 16.9% and 64%, respectively, from the year-ago levels.
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OneSpaWorld (OSW) Up 32% in a Year: What's Next for Investors?
OneSpaWorld Holdings Limited (OSW - Free Report) rallied 32.2% in the past year compared with the Zacks Leisure and Recreation Services industry’s 3.1% growth. This success is on the back of the company’s innovation in offerings, expansion efforts and accretive collaborations.
The company is benefiting from a healthy demand environment. Also, strength in retail sales and pre-bookings are adding to the positives. OSW plans to unveil new and innovative products and services, empower its cruise ship staff (to deliver exceptional service), enhance efficiency (through technological upgrades) and secure new contracts to foster growth.
Image Source: Zacks Investment Research
What Makes the Stock Attractive?
Solid Cruising Demand: OneSpaWorld is thriving in a strong demand environment with innovative offerings and high operational standards. During first-quarter fiscal 2024, the company generated total revenues of $211.2 million, reflecting up 16% year over year. The upside was primarily led by the average ship count rising 9% year over year to 188. The onboard health and wellness centers played a significant role in this increase. The company's initiatives, such as enhanced pre-booking of guest services, improved onboard engagement, innovative service offerings and strict operational protocols, further boosted revenues and profitability.
Given the strong consumer demand and a proven strategy in place, the company raised its fiscal 2024 outlook. For fiscal 2024, the company now expects total revenues to increase by 10% year-over-year, in the range of $860-$880 million, up from a prior projection of $850-$870 million. Adjusted EBITDA is anticipated to increase by 12% year-over-year, reaching between $95 million and $105 million, up from a prior projection of $90 million to $100 million.
Accretive Partnerships: The company is benefiting from its focus on strategic partnerships, particularly through increased collaboration with cruise line partners, leading to higher productivity, revenue generation and profitability across its health and wellness centers.
During the fiscal first quarter, OSW made significant strides in expanding its partnership network, securing a new exclusive agreement with Royal Caribbean and Celebrity Cruises for their existing fleet of 40 ships and future vessels. OSW also added Aroya Cruises to its portfolio, where it will manage all health and wellness facilities starting in late 2024, reinforcing its strong market position and operational excellence. OSW anticipates managing approximately 198 vessels by the end of the fiscal 2024.
Strategic Initiatives: The company continues to expand its high-value offerings in health and wellness centers, including premium medi-spa, acupuncture and advanced facial services, leading to increased guest demand and spending. It also implemented pricing adjustments across its brands for core services.
During the fiscal first quarter, OSW achieved double-digit growth in key maritime operating metrics. This was supported by strategic initiatives to increase pre-booking, treatments per client and spa usage by passengers. These efforts are aimed at optimizing staffing, facilities and service capacities to enhance health and wellness center economics. The company simplified service menus and adjusted treatment approaches, driving higher revenue per guest through increased service frequency and a shift toward premium services and products.
Innovation in Offerings: The company is benefiting from its focus on advancing its service offerings and enhancing value through innovative approaches. OSW focused on introducing higher-value medi-spa and advanced facial techniques, necessitating specific equipment in treatment rooms and trained staff. With cruise line partners investing in enhanced health and wellness centers on new ships, the company is expanding these services, leading to a more profitable service mix.
The company continues to expand its service offerings, introducing new cryotherapy body and LED facial services alongside the ELEMIS BIOTEC 2.0 facial technology. The company has been rolling out LightStim therapy, enhancing its acupuncture services and notably boosting revenue in markets where this protocol has been implemented.
Valuation & Estimate Revision
The company’s earnings estimates for the fiscal 2024 suggest a growth rate of 28.6% from the year-ago period’s levels on a 10.4% revenue improvement. Its earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 4.7%. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
From a valuation standpoint, despite its forward 12-month price-to-sales ratio of 1.71X being above the industry average of 1.43X, the stock remains compelling for investors. This premium valuation is justified given the company's strategic efforts to enhance revenue growth and strengthen its market standing.
Conclusion
Although, the company’s valuation looks expensive its fundamentals are very solid. The company expects long-term benefits from the cruise industry's growth capacity, with 16 new ships expected from existing cruise line partners by the end of 2026. OSW is well-positioned to capitalize on this growth through strong partner relationships, current contracts, competitive operational infrastructure, a history of exceptional guest experiences, and a high contract renewal rate of approximately 97% in the past 15 years Investors might consider adding this Zacks Rank #2 (Buy) stock to their portfolios.
Other Key Picks
Some other top-ranked stocks in the Zacks Consumer Discretionary sector are:
PlayAGS, Inc. (AGS - Free Report) sports a Zacks Rank of 1 (Strong Buy). AGS has a trailing four-quarter earnings surprise of 33.3%, on average. The stock has appreciated 117% in the past year. You can see the complete list of today’s Zacks Rank #1 stocks here.
The consensus estimate for AGS’s 2024 sales and earnings per share (EPS) suggests growth of 7.7% and 5,200%, respectively, from the year-ago levels.
Adtalem Global Education Inc. (ATGE - Free Report) currently carries a Zacks Rank of 2. ATGE has a trailing four-quarter earnings surprise of 18.8%, on average. The stock has surged 101.9% in the past year.
The Zacks Consensus Estimate for ATGE’s fiscal 2025 sales and EPS indicates an increase of 8.3% and 16.4%, respectively, from year-ago levels.
Royal Caribbean Cruises Ltd. (RCL - Free Report) currently carries a Zacks Rank of 2. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has rallied 52.7% in the past year.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS calls for growth of 16.9% and 64%, respectively, from the year-ago levels.