Six Flags Entertainment Corporation (SIX - Get Rating) in Grand Prairie, Tex., is the world’s biggest regional theme park corporation and the largest operator of waterparks in North America, with 27 parks in the United States, Mexico, and Canada.

The stock is down 36.6% in price over the past year and 31.5% year-to-date to close yesterday’s trading session at $29.19. In addition, its shares are currently trading 38.2% below their 52-week high of $47.24, which it hit on Feb. 02, 2022. 

SIX’s sales climbed by 68% in the first quarter, ending April 3, 2022, owing to numerous optimistic trends that include increasing attendance, higher ticket prices, and more spending per visit to its theme parks. However, the first quarter is a small part of SIX’s year because several of its parks are closed throughout the winter. The second and third quarters account for almost three-fourths of its attendance. This fact could raise investors’ concerns as increasing interest rates and inflation heighten the risk of declining consumer spending.

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

Mixed Profitability

SIX’s 49.4% trailing-12-month gross profit margin is 36.5% higher than the 36.2% industry average. Its trailing-12-month net income margin and ROC are 60.8% and 65% higher than their respective industry averages. However, its trailing-12-month asset turnover ratio and ROA are 45.8% and 2.5% lower than their respective industry averages.

Premium Valuation

In terms of forward EV/Sales, the stock is currently trading at 3.37x, which is 201.3% higher than the 1.12x industry average. Furthermore, SIX’s 1.51x forward Price/Sales  is 58.1% higher than the 0.95x industry average.

Consensus Rating and Price Target Indicate Potential Upside

Among the 10  Wall Street analysts that rated SIX, nine rated it Buy, and one rated it Hold. The 12-month median price target of $50.00 indicates a 71.3% potential upside. The price targets range from a low of $32.00 to a high of $60.00.

POWR Ratings Reflect Uncertainty

SIX has an overall C rating, which equates 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. Its 2.25 beta is in sync with its Stability grade. SIX has a Value grade of C, which is reflective of its stretched valuation.

Among the 16 stocks in the F-rated Entertainment – Sports & Theme Parks industry, SIX is ranked #4.

Beyond what I have stated above, one can view SIX ratings for Growth, Quality, Momentum, and Sentiment here.

Bottom Line

SIX’s stock has declined nearly 14.4% in price over the past month. While the company has exhibited solid growth in its last reported quarter, increasing inflation and high-interest rates could impact consumer spending, jeopardizing SIX’s near-term prospects. So, 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 $0.19 (-0.65%) in premarket trading Thursday. Year-to-date, SIX has declined -31.89%, versus a -13.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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