Pursuit (PRSU)

Experiential tourism company Pursuit Attractions and Hospitality (NYSE:PRSU) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 86.3% year on year to $37.58 million. Its non-GAAP loss of $0.96 per share was 31.5% below analysts’ consensus estimates.

Company Overview

With attractions ranging from glacier tours in the Canadian Rockies to an oceanfront geothermal lagoon in Iceland, Pursuit Attractions and Hospitality (NYSE:PRSU) operates iconic travel experiences, experiential marketing services, and exhibition management across North America and Europe.

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Pursuit Attractions and Hospitality competes with various tourism and hospitality companies including Disney (NYSE: DIS), Cedar Fair (NYSE: FUN), and Six Flags (NYSE: SIX) in attractions, while its event services segments compete with Freeman, Informa (LSE: INF), and Emerald Holding (NYSE: EEX).

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Pursuit’s demand was weak over the last five years as its sales fell at a 37% annual rate. This was below our standards and suggests it’s a lower quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Pursuit’s recent performance shows its demand remained suppressed as its revenue has declined by 67.2% annually over the last two years.

This quarter, Pursuit missed Wall Street’s estimates and reported a rather uninspiring 86.3% year-on-year revenue decline, generating $37.58 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 214% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will catalyze better top-line performance.

Pursuit’s operating margin has been trending up over the last 12 months and averaged 16.7% over the last two years. On top of that, its profitability was top-notch for a consumer discretionary business, showing it’s an well-run company with an efficient cost structure.

In Q1, Pursuit generated an operating profit margin of 48.2%, up 53 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Pursuit, its EPS and revenue declined by 14.1% and 37% annually over the last five years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, Pursuit’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, Pursuit reported EPS at negative $0.96, up from negative $1.13 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Pursuit has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.1%, subpar for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Pursuit to make large cash investments in working capital and capital expenditures.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Pursuit’s five-year average ROIC was negative 10.4%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Pursuit’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Pursuit reported $0 of cash and $0 of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $125.2 million of EBITDA over the last 12 months, we view Pursuit’s 0.0× net-debt-to-EBITDA ratio as safe. We also see its $1.17 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Pursuit’s full-year EBITDA guidance beat analysts’ expectations. On the other hand, its EPS missed significantly and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. Still, the stock traded up 1.2% to $30.02 immediately after reporting.

Updated: May 10, 2025 at 11:54 PM EDT

Are you wondering whether to buy Pursuit or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Pursuit isn’t a terrible business, but it doesn’t pass our bar. To begin with, its revenue has declined over the last five years. On top of that, Pursuit’s declining EPS over the last five years makes it a less attractive asset to the public markets, and its projected EPS for the next year is lacking.

Pursuit’s EV-to-EBITDA ratio based on the next 12 months is 8x. Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $55 on the company (compared to the current share price of $28.92).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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