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Six Flags has good financial year

By
From page B4 | February 25, 2013 |

Six Flags Entertainment Corporation announced that it had a record financial year in 2012 with $1.1 billion in annual revenue.

Locally, Six Flags Entertainment runs Discovery Kingdom theme park in Vallejo. Discovery Kingdom announced it will open its 2013 season on the weekend of March 16-17.

Barry Eberling

Barry Eberling

Barry Eberling has been a reporter with the Daily Republic since 1987. He covers Solano County government, transportation, growth and the environment. He received his bachelors of art degree from the University of California, Santa Barbara and his masters degree in journalism from the University of California, Berkeley.
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Discussion | 3 comments

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  • Danny BuntinFebruary 25, 2013 - 2:38 pm

    That is not surprising. Every time I drive by on I-80, I feel a tugging on my wallet from that location. Once every couple of years is enough torture for me.

    Reply | Report abusive comment
  • RichFebruary 25, 2013 - 4:44 pm

    I hope you're not trying to claim the Vallejo Six flags park was profitable last year!

    Reply | Report abusive comment
  • Golden EagleMarch 13, 2013 - 8:37 pm

    THE SIGNIFICANTLY OVERVALUED SIX FLAGS’ STOCK In the past two years, Six Flags stock price has more than doubled, from $30 to $69, and many people still believe it is a good buy. IS SIX FLAGS REALLY WORTH SO MUCH? Here we would like to share our objective view with you. It is always good to know the “true value” of a stock, rather than just follow the market sentiments. To know how much a stock is worth, we need to check the profit Fix Flags makes. The past few years’ profit of Six Flags has been exactly same as its roller coaster----Loss of $229M in 2009, Profit of $599M in 2010, Loss of $24M in 2011, and Profit of $347M in 2012. No consistency in profitability is a true reflection of the business’ volatility. When we look at the Free Cash Flow, we find no consistency either---minus $6M in 2009, $26M in 2010, $186M in 2011, and $344M in 2012. The cash flow seems ready to jump into the sky. BUT ALL THESE ARE JUST ILLUSIONS! How profitable can Six Flags really be? Walt Disney net profit margin is 9%-13% in the past 4 years; Starbucks about 4%-10%; Goldman Sachs 13% to 26%. For argument’s sake, let us assume Six Flags can make 15%, much better than Disney and most of other companies. This means its profit for a regular year should be around $160M (15% multiply by $1.1B). For such a business, what PE ratio should be applied? Market average today is 15. Given entertainment business is very susceptible to macro economy, and economy today is still very fragile, it is safe to say that PE ratio for Six Flags should not be over 15. So the maximum market cap for Six Flags is $2.4B ($160M*15), or $48/share, assuming there are no significant risks hidden for this business. SIX FLAGS STOCK HAS BEEN OVERVALUED BY AT LEAST 45%. Then why Six Flags stock price has reached $69? Six flags stock price has been driven to $69 by the following factors: (1) High dividend payout ($180M a year, which is more than profit, unsustainable); (2) One-time profit from business sales ($70M); (3) One-time tax benefit ($180M); (4) Aggressive stock buyback ($200M in year 2012, another $220M in Jan/Feb 2013), mostly funded by incremental debt (the long-term loan increased from $1.0B to $1.4B in year 2012), unsustainable as well. Interestingly, in the past few quarters, major top stockholders have gradually dumped Six Flags (please refer to InsideMonkey.com). The reason is simple and clear---why not take big profit now and have a good party rather than hold a big bubble that will burst anytime? To keep holding Six Flags stock and hope the big bubble continue to grow, or to pass it to somebody else and secure the profit you have made? To an investor, it is not a question.

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