Theme-park operator Six Flags ($SIX) reported earnings today (7/25/18), and showed incredibly positive results. The 2,000 employee entertainment behemoth is losing pre-market value and creating a buy opportunity on strong results. We took a look at the stock itself, and combed through the rollercoaster of an industry, to pull some highlights:

  • Q2 earnings per share (EPS) was $0.88, and that was right in line with analyst expectations
  • Q2 revenue reported was $445.42 million, +5% year over year, and beat estimates by $6.6 million.
  • Saw a 3% increase in attendace to its theme parks
  • Saw a 2% increase in spending per guest
  • Saw a whopping 9% increase in sponsorship, licensing, and accomodation revenue
  • ActivePass, the company’s season pass, saw an increase in it’s user base of 8%

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With numbers like this, and yearly revenue of $1.39 billion, you can see why we would like this stock, and would see a dip as a buying opportunity. Not to mention the fact, Six Flags pays a healthy dividend, yielding 4.65% (about $3.12 a share).

Strong numbers for Six Flags

In addition to increasing average guest spend, and increasing revenue, the company has a 91.8% gross margin, and just shy of a 20% profit margin (19.4% to be exact). The stock has also seen a 20% growth for the year, and when we broke down the financial statements, we think there is still growth to be had in the stock.

Six Flags provides opportunities to make money several ways

A 4.65% dividend for Six Flags is nothing to sneeze at, and the company pays out 87.1% of profit. Looking at a 5 YR EBITDA return for $SIX, we put a fair value range of $67.55 – $85.56 on the stock, with us settling on $76.39 (14% upside) price target, after taking all factors into consideration.

Looking at a competitors EPS analysis, we see the stock having even more upside, with an $80.52 price target, representing a 20% upside to the current share price.

If you want to play options with those targets (especially if you would rather spend money on soft pretzels instead of the higher share price), 2 DEC 2018 CALL options at a share buy price of $66.50, and $1.01 option price, buying 10 contracts and the share price hitting $78 by 28 OCT 2018, you would realize a 216% return on your investment, and a profit of $2,180.

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