Nine New Maritime Wellness Centers Will Open In 2025

Key Takeaways

• Strategic expansion into higher-value services and market initiatives aims to enhance revenue and improve net margins with premium-priced offerings.
  
• Enhanced sales training, a focus on productivity, and increased prebooking are expected to boost earnings and positively impact net margins.
  
• Reliance on specific partnerships and market trends makes OneSpaWorld vulnerable to disruptions, potentially impacting revenue and profit, while economic shifts could affect financial strategy.

Catalysts

Operates health and wellness centers onboard cruise ships and at destination resorts in the United States and internationally.

• OneSpaWorld plans to add nine new maritime health and wellness centers in 2025 and expects these will drive revenue growth primarily in Q4, due to most ships commencing voyages then, boosting annual revenues.
  
• Strategic expansion of higher-value services and products, such as Medi-Spa IV therapy, acupuncture, cryotherapy, and LED light facial services, is anticipated to enhance revenue and potentially improve net margins due to higher-priced offerings.
  
• Continued focus on increasing health and wellness center productivity by raising revenue per passenger per day and revenue per staff per day through enhanced sales training and staff retention, aiming to bolster earnings and net margins.
  
• The initiative to increase prebooking of services on board, which sees guests spending 30% more than those who do not prebook, is expected to positively impact revenue and potentially improve net margins.
  
• Enhancements in capital structure and cash flow through reduced debt levels and ongoing share repurchase programs suggest that EPS could increase, boosting shareholder value over time.

OneSpaWorld Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming OneSpaWorld Holdings's revenue will grow by 8.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.1% today to 9.0% in 3 years time.
• Analysts expect earnings to reach $101.5 million (and earnings per share of $0.94) by about April 2028, up from $72.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.2x on those 2028 earnings, up from 24.3x today. This future PE is greater than the current PE for the US Consumer Services industry at 18.9x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.57%, as per the Simply Wall St company report.

OneSpaWorld Holdings Future Earnings Per Share Growth

Risks

• There is a risk associated with relying heavily on specific partnerships and contracts, such as the 7-year agreement with Royal Caribbean International and Celebrity Cruises; if these relationships falter, it could negatively impact revenue from their cruise operations.
  
• Any hiccup in the expansion plan of Medi-Spa services, due to limitations in facility space or recruitment challenges for qualified medical staff, could stall anticipated revenue and net margin growth.
  
• The business structure depends greatly on strong cruise line booking trends; should the market face downturns or reduced consumer spending, it could affect passenger spending and subsequently impact revenue metrics.
  
• Dry docks scheduled to impact the first quarter of 2025 could create disruptions, leading to reduced availability of services and consequently impacting revenue and profit for that period.
  
• With significant debt that has been reduced to $100 million, the financial strategy may become vulnerable if economic conditions change abruptly, potentially affecting earnings and shareholder returns.

Valuation

• The analysts have a consensus price target of $22.75 for OneSpaWorld Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $101.5 million, and it would be trading on a PE ratio of 28.2x, assuming you use a discount rate of 6.6%.
• Given the current share price of $16.9, the analyst price target of $22.75 is 25.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.