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Six Flags Entertainment Corp (SIX): Are You Daring Enough to Invest in This Theme Park?

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Are you prepared to brave the new Texas Giant, the wooden El Toro, or the steel Bizarro rollercoasters? If that’s not enough, then perhaps you should consider Kingda Ka, the tallest and fastest thrill ride in existence, or Full Throttle, the fastest looping rollercoaster at 70 m.p.h. And if that’s not enough, consider investing in Six Flags Entertainment Corp (NYSE:SIX).

Six Flags Entertainment Corp (NYSE:SIX)

This doesn’t necessarily mean you will make money.  Like a rollercoaster, Six Flags Entertainment Corp (NYSE:SIX) may move up and down at intense speeds.  This is a cyclical business, so many investors may think now is the ideal time to invest.  So let’s take a look at the Six Flags situation, let’s see if it presents a good opportunity, and whether one of its peers might make a better bet.

The backstory

When Six Flags Entertainment Corp (NYSE:SIX) went bankrupt four years ago, it looked like any hope for future success had been destroyed. Many people expected its rollercoasters to be shut down and for weeds to claim the land (prior to the land being sold). But the story took a different turn.

Coming out of bankruptcy and armed with $1.5 billion, due to restructuring, Six Flags Entertainment Corp (NYSE:SIX) implemented a new strategy. Instead of relying on existing rides and moving into the entertainment business, it consistently opened new rides to drive repeat traffic.  It also refocused on its core operations.

Today, Six Flags is relying heavily on customer surveys for improvements. If a complaint or suggestion comes in, then a change will be made to please the customer. So yes, your opinions do matter.

Furthermore, Six Flags is now very focused on efficiency as well as returning capital to shareholders. The goal of becoming more efficient looks as though it’s being achieved, as supported by its profit margin of 37.25%. In regards to returning more capital to shareholders, Six Flags currently yields a 5% dividend.

While returning capital to shareholders is a selling point, it’s also expensive. It will be interesting to see if Six Flags can maintain such a high yield if growth begins to slow.  It should also be noted that all Six Flags Entertainment Corp (NYSE:SIX) employees are shareholders, which is a big plus as it keeps employees motivated.

Six Flags vs. peers

Six Flags owns and operates 18 amusement parks — 16 in the United States, one in Mexico, and one in Canada. Its amusement parks offer thrill rides, water rides, games, concerts, and shows. Revenue has consistently improved over the past three years, and earnings went from a small loss to a large gain between 2011 and 2012. It looks as though new strategies have been paying off. Six Flags Entertainment Corp (NYSE:SIX) is trading at 9 times earnings.

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