Six Flags Entertainment Corp (SIX), Cedar Fair, L.P. (FUN), SeaWorld Entertainment Inc (SEAS): Should You Take a Ride With These Theme Parks?

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Much like their roller coasters’ harrowing first drops, the theme park operators’ stock prices dropped sharply during the financial crisis, as high debt loads and falling attendance proved to be a bad combination.Six Flags Entertainment Corp (NYSE:SIX) made its way to bankruptcy court in 2009, while the other major operators like Cedar Fair, L.P. (NYSE:FUN) and SeaWorld Entertainment Inc (NYSE:SEAS) scaled back their capital expansion plans. However, the economic recovery has brought the masses back to the parks looking for a little entertainment. With good dividends and high barriers to entry, is the sector a good place for investors?

Six Flags Entertainment Corp (NYSE:SIX)

In a word…yes

Theme parks have proven to be universally popular, crossing both generations and geographical boundaries. The parks segment has long been a core business unit for Disney, accounting for roughly 30% of sales, ever since it opened Disneyland in the 1950’s. The company has successfully used its parks to create opportunities for its media properties, ultimately creating lifelong customers and shareholder value.

Finding a sales pitch

Of course, not everyone has Disney’s lovable cast of characters, so other operators need a unique hook for customers. Usually, the parks’ main draw is having the tallest and fastest roller coasters in the world. While Cedar Fair, L.P. (NYSE:FUN)’s Cedar Point property can’t claim the tallest coaster anymore, it is generally regarded as the best theme park, complete with fifteen coasters, four hotels, water parks, and a marina. The company has eleven theme parks that dot major metro areas in the U.S. and Canada, but its main value comes from its namesake property.

In its latest fiscal year, Cedar Fair, L.P. (NYSE:FUN) reported its third straight year of growth, with increases in revenues and adjusted operating income of 3.9% and 4.4%, respectively, versus the prior year. While overall attendance was flat, due in part to poor weather, the company enjoyed gains in its customers’ average spending within its parks and at its hotels. In addition, Cedar Fair, L.P. (NYSE:FUN)’s strong cash flow allowed it to continue investing in new attractions for its habitually thrill seeking customers.

Meanwhile, Six Flags Entertainment Corp (NYSE:SIX) emerged from bankruptcy in 2010 with a nationwide park portfolio and a nimble capital structure, thanks to a $1.5 billion debt restructuring. While the company doesn’t have a trophy property like Cedar Point, it has a diverse group of eighteen properties in major metropolitan markets, making it the largest theme park operator in the world. Six Flags can also lay marketing claim to the world’s tallest roller coaster, its Kingda Ka ride at Six Flags Great Adventure.

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