Selling The Seas Case Study Part 1 – Making A Mistake?

Selling The Seas Case Study Part 1 – Making A Mistake?

I read the book Selling The Sea in early 2014 as a way to learn about the cruise industry.  Up to that point I didn’t know anything about it other than I never want to go on one because of my dizziness.

From an investment perspective I wanted to expand my circle of competence to the cruise industry because it’s an industry that seems ripe for competitive advantages.

Captured customers who have to stay on the boats for sometimes months at a time.  Very few major operators.  And high initial costs to buy or build boats that keep smaller companies out of the industry are a few examples.

While I learned about the industry I still haven’t invested in any cruise related public company because of high valuations.  But I did learn about one in this book that caught my eye.  And I’ve kept it on my watch list ever since.

I was never able to buy the company because it was overvalued.  But was it really?

The company we’re going to do a case study on over the coming weeks is Steiner Leisure (STNR).

Private equity firm Catterton is about to buy STNR for $834 million.  Or $65 a share.   A 15% premium to its current share price.  And a 39% premium to the price I could have bought it at almost two years ago.

So did I make a mistake in my analysis then by not buying it?  Or is the private equity firm buying the company at overvalued levels now and making a mistake?

Let’s find out

Below are the 2013 and 2014 10K’s for the company and the most recent 2nd quarter 2015 release.  I used the 2013 one to evaluate the company more than a year ago.  And haven’t looked at them again since.

2013 10K

We need to use this one to find out if I made a mistake in my initial analysis.

We need to use the 2014 10K below to find out if the company is a good buy today.  Or if the private equity firm who’s buying it is making a mistake.

2014 10K

Also provided here is the most recent quarterly information the companies released as well.

The next case study post I’ll start to go over my preliminary analysis from both years.


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