Why Coinstar Could Head Higher

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Shares of Coinstar (NAS: CSTR) hit a 52-week high on Thursday. Let's look at how it got here and whether clear skies are ahead.

How it got here
Almost immediately after touching a 52-week high in April, the kiosk operator boosted first-quarter and full-year guidance, expecting consolidated revenue of $2.2 billion to $2.3 billion, with core diluted earnings per share expected at $4.40 to $4.80.

It went on to post a strong first quarter in line with its revised guidance. Sales came in at $568.2 million, again primarily driven by healthy growth in its Redbox segment, which grew 39% to $502.9 million, while its namesake Coinstar division inched up 5.6% to $64.8 million. For its efforts, net income popped significantly to $53.7 million, or $1.65 per share.


Just last month, the company announced a partnership with Starbucks' (NAS: SBUX) Seattle's Best Coffee division to begin selling coffee in thousands of kiosks around the country, starting at a buck per cup. Then Coinstar said it closed the previously announced acquisition of NCR's (NYS: NCR) DVD kiosk business, further strengthening its position in the DVD kiosk market.

How it stacks up
Let's see how Coinstar stacks up with entertainment rivals, including online streamers as Coinstar prepares for its long-awaited streaming.

CSTR Chart

CSTR data by YCharts

Let's include some fundamental metrics for more insight.

Company

P/E (TTM)

Sales Growth (MRQ)

Net Margin (TTM)

ROE (TTM)

Coinstar14.834%7.7%30.7%
Netflix (NAS: NFLX) 27.421.1%4.8%34.4%
DISH Network (NAS: DISH) 9.611.1%9.2%N/A

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter. N/A = not available.

DISH and Coinstar have ambitions of challenging Netflix in online streaming, but Coinstar is doing just fine without it. Netflix has long since shifted focus away from its own DVD-by-mail business in order to focus on streaming, and Redbox is happy to step up to fill that need.

What's next?
Coinstar continues to put up strong growth and expand its kiosk businesses. Redbox's momentum will keep driving growth while additional catalysts like coffee kiosks have promising potential. Coinstar should keep heading higher.

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At the time this article was published Fool contributor Evan Niu owns shares of Starbucks, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Starbucks and Netflix. Motley Fool newsletter services have recommended buying shares of Coinstar, Starbucks, and Netflix. Motley Fool newsletter services have recommended writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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