Six Flags Entertainment Corporation (SIX) reached a new all-time high after delivering a 104.8% earnings surprise in the second quarter 2012. With an expected year-over-year earnings growth of 303.3% in 2012 and long-term growth projection of 10%, this Zacks #1 Rank (Strong Buy) theme park operator looks like a solid pick for growth-seeking investors.
Fabulous Second Quarter
On July 24, Six Flags reported impressive second quarter results with earnings of $1.27 per share, substantially beating the Zacks Consensus Estimate of 62 cents and the year-ago earnings of 65 cents.
Revenue increased 11% year over year to $375 million, primarily led by strong ticket sales (up 11%), increased in-park sales (up 12%) and higher attendance (up 12%). Adjusted EBITDA improved 24% from the prior-year quarter to $141 million.
As of June 30, 2012, Six Flags' net leverage ratio declined to an industry low of 2.2 from 2.6 as of June 30, 2011.
Surge in Earnings Momentum
Six Flags' solid second quarter earnings surprise resulted in an uptrend in estimate revisions. Over the past 7 days, the Zacks Consensus Estimate for 2012 rose a stupendous 334.2% to $1.65 per share on the back of upward revisions in 2 out of 3 estimates.
For 2013, the Zacks Consensus Estimate is $1.82 per share, exhibiting an increase of 23.0% in the last 7 days, aided by upward revisions in all 3 estimates. The current estimate suggests a year-over-year growth of 10.3%.
Six Flags' valuation looks expensive compared with its peers by most metrics. Its trailing twelve months P/E of 46.03x is well above the peer group average of 25.67x. Moreover, the stock is currently trading at a forward P/E of 35.08x, higher than the peer group average of 21.54x. The price-to-book of 4.94x is more than double the peer group average of 2.01x. The P/S ratio is 2.98, a 65.6% premium to the peer group average of 1.80. A healthy earnings growth prospect in the current and ensuing year warrants the premium valuation of the company.
Chart Resonates Growth Potential
Since October 26, 2011, Six Flags stock remained above its 200 day moving average, which currently stands at $44.30. It has also remained above the 50-day moving average since June 5, 2012. Moreover, after the second quarter earnings release, shares of Six Flags have been on the rise.
Volume is fairly strong, averaging roughly 400K daily. The stock has also outperformed the S&P 500 year-to-date and has delivered a return of 40.64% during the period versus a mere 10.15% for the benchmark.
Based in Grand Prairie, Texas, Six Flags Entertainment owns and operates 19 parks across the United States, Mexico and Canada. The company's parks offer full enjoyment for all the age-group through exciting rides, water attractions and themed areas. It was established in 1961 and employs about 1,900 employees worldwide. With a market capitalization of $3.08 billion, Six Flags Entertainment primarily competes with Cedar Fair, L.P. (FUN) and Speedway Motorsports Inc. (TRK).
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