What: Shares in entertainment company Ardent Leisure Group (ASX: AAD) hit a six-year high of $3.49 in November 2014 following the successful expansion of its Main Event entertainment centres in the US, but the stock has subsequently plunged back to $2.10, representing an intriguing opportunity for long-term investors.
What Happened: After briefly soaring over $3.40 last year, Ardent's shares traded steadily downwards toward $2.80 before the company announced a shock dive in the performance of the group's Australian network of Goodlife gyms during February's half-year report.
Analysts noted that earnings were actually in line with estimates but an 11% drop in the earnings before interest, tax, depreciation and amortisation (EBITDA) of the health club division saw the share price plunge 14% on the day. At over 30% of group EBITDA it's understandable that investors were concerned by the fall.
Then just a month later long-running CEO Greg Shaw announced that he would retire from his position effective July 2015. Having been at the company for nearly 14 years, he has guided the group through the GFC and a major expansion into the US.
Investors are concerned that without his experience, the group could falter in its planned growth in the US and fail to turnaround the gym business. The shares subsequently fell by a further 15% on the day to trade around the $2.10 level.
What Now: Well, Ardent's shares look cheap trading at a one-year low. Analysts still expect Ardent to grow earnings per share this year and it has multiple growth options.
Ardent is also yielding over 6% and is rated as a buy or accumulate by a number of analysts despite the uncertainty created by new CEO Deborah Thomas taking the reins. Perhaps a new set of eyes could see earnings from the stagnant theme parks and bowling divisions grow over time.
Of course, I can't yet be considered an expert on these matters so before making buy decisions I consult with The Motley Fool Pro investors.
