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Bring Out The Popcorn For Marcus Corp

  • September 20, 2006

Marcus Corp (MCS) reported first quarter earnings yesterday and the stock popped $1.52 or 6.76% in response today. While revenue increased just 8% to $93.4 million and earnings from “continuing operations” increased 10.7%  to $13.6 million, investors were clearly thrilled by the 27.9% increase in operating income in the hotels and resorts division. This probably comes as no surprise to business travelers who have seen hotel room prices creep up steadily over the last two years. The 6% rise in theatre attendance at its 501 movie screens lay to rest the concerns on Wall Street that 2006 may not be a good year for the U.S box office.

The stock is now up a market scorching 41.76% since I first mentioned it in a blog post titled Lets Go To The Movies early this year (after including the $7/share special dividend distributed in February) and is up 14.72% since my follow up post titled Marcus Makes A Comeback less than two months ago. In spite of these returns the stock continues to stay under Wall Street’s radar and only has an average daily volume of about 100,000. On one of those rare occasions when I happened to catch a show of Jim Cramer’s Mad Money With Cramer a few months ago, a caller asked Cramer about Marcus and he said he was not familiar with the stock.

I originally picked Marcus based on its valuation and dividend yield when it showed up on a stock screen I ran late last year. With the recent run up in the stock, Marcus now trades at a trailing and forward Price/Earnings ratio of 26, a Price/Sales ratio of 2.36 and sports a dividend yield of just 1.4%, much lower than the average dividend yield of the S&P 500. Based on this increase in valuation, I believe that it may be time to take some profits off the table.

Some of the other stocks that showed up in that stock screen include Suburban Propane (SPH), Ross Stores (ROST) and NetScout Systems (NTCT). Suburban Propane (SPH) still sports a high dividend yield of 7.8% and was mentioned in the October 2005 edition of my investment newsletter and once again in May 2006. NetScout Systems (NTCT) was briefly discussed in the blog entry Stocks That Almost Made The Cut: March 2006 and Ross Stores (ROST) was featured in the November 2005 edition of InsideArbitrage.

Voluntary Disclosure: I am currently long shares of Marcus, but not for long.