Tuesday, May 24, 2011

Regis Corporation (NYSE: RGS) Q3 2011 Price Target

Recent price: 14.75$
P/E Ratio: 42.70
3 Months Target Price: 21$

Company Description
Data provided by Reuters tells us that Regis Corporation is engaged in owning, operating and franchising hair and retail product salons. In addition to the primary hair and retail product salons, the Company owns Hair Club for Men and Women, a provider of hair restoration services. As of June 30, 2010, the Company owned, franchised or held ownership interests in over 12,700 worldwide locations. The Company's locations consisted of 9,929 Company-owned and franchise salons, 95 hair restoration centers, and 2,704 locations, in which the Company maintains an ownership interest of less than 100%. The Company's hair restoration centers offer three hair restoration solutions: hair systems, hair transplants and hair therapy. The Company is organized in two lines of business: salons and hair restoration centers.

Confidence Margins
Strong resistance $21.69 (+47%)
Light resistance $19.20 (+30%)
Light support $12.84 (-13%)
Strong support $11.00 (-25%)

The stock price of Regis Corporation has been on a downtrend since the end of April 2011 when the company provided a revenue guidance that disappointed investors. The industry in which the company operates is not a very attractive one when compared to tech companies and investors have been giving away their shares. Current prices provide a good addition to a portfolio for the coming months.

Entry strategy
For the cautious investor:
Buy the stock for 15$ or less.

For the risk-taking trader:
The September 2011 17.50$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 40$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 21$, or keep it until 23.50$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 21$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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