Six Flags Entertainment Corporation (SIX - Get Rating) owns and operates regional theme and water parks under the Six Flags name. Its parks offer various thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets.

SIX’s revenue rose 68% in the first quarter, owing to several positive trends, including increased attendance, higher ticket prices, and higher spending per visit to its theme parks.

However, the stock has plunged 51.2% year-to-date to close its last trading session at $20.79. The downtrend was exacerbated after Citigroup  downgraded its recommendation on the stock from “Buy” to “Neutral,” on concerns over lower attendance due to high inflation and a potential recession. The investment bank also lowered the price target to $26 from $41.

Here is what could shape SIX’s performance in the near term:

Unstable Financials

During the first quarter ended April 3, 2022, SIX’s total revenue increased 68% year-over-year to $138.11 million. However, its net loss amounted to $65.66 million, while its loss per share came in at $0.76. The net cash used in operating activities stood at $55.71 million for the quarter ending April 3, 2022.

Premium Valuation

In terms of forward EV/Sales, the stock is currently trading at 2.95x, which is 178.7% higher than the 1.06x industry average. Furthermore, SIX’s 1.09x forward Price/Sales is 31.2% higher than the 0.83x industry average.

Mixed Profitability

SIX’s 49.36% trailing-12-month gross profit margin is 34.6% higher than the 36.67% industry average. However, its 0.56% trailing-12-month asset turnover ratio is 45.4% lower than its industry average of 1.02%. Also, its 5.55% trailing-12-month ROA is 1.4% lower than its industry average of 5.63%.

Consensus Rating and Price Target Indicate Potential Upside

Of the 10 Wall Street analysts that rated SIX, seven rated it Buy, and three rated it Hold. The 12-month median price target of $43.70 indicates a 110.2% potential upside. The price targets range from a low of $24.00 to a high of $60.00.

POWR Ratings Reflect Uncertainty

SIX has an overall C rating, equating to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. SIX has a D grade for Stability, which is justified given its 2.28 stock beta. It also has a C grade for Growth and Momentum. Its mixed financials are in sync with its Growth grade. In addition, the stock is trading below its 50-day and 200-day moving averages of $27.15 and $38.14, respectively, justifying its Momentum grade.

Among the 16 stocks in the F-rated Entertainment – Sports & Theme Parks industry, SIX is ranked #7.

Beyond what I’ve stated above, you can view SIX ratings for Sentiment, Quality, and Value here.

Bottom Line

SIX has declined 21.2% over the past month and 47.3% over the past three months. SIX’s higher valuation and bleak financials are concerning. Therefore, we think investors should wait before scooping up its shares.

How Does Six Flags Entertainment Corporation (SIX) Stack Up Against its Peers?

While SIX has an overall C rating, one might want to consider its industry peer, Endeavor Group Holdings, Inc. (EDR - Get Rating), which has an overall B (Buy) rating.

SIX shares fell $0.64 (-3.08%) in premarket trading Wednesday. Year-to-date, SIX has declined -51.86%, versus a -20.52% rise in the benchmark S&P 500 index during the same period.

About the Author: Spandan Khandelwal

Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...

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