Key Takeaways:
- Six Flags Entertainment has completed a $1 billion offering of senior notes due 2032 to refinance its debt schedule.
- The company’s share price has experienced a 1-day return of 4.25% and a 30-day return of 6.91%, despite a 1-year total shareholder return decline of 65.62%.
- The share price is still well below its value from a year ago, trading at a large discount to some analyst targets and intrinsic estimates.
- The most popular narrative suggests that the company is 38.9% undervalued, with a fair value of $26.08 per share.
- The company’s high leverage and weather-driven attendance volatility pose significant risks to its margin and cash flow improvements.
Introduction to Six Flags Entertainment’s Refinancing
Six Flags Entertainment has recently completed a $1 billion offering of 8.625% senior notes due 2032, using the proceeds to fully redeem senior notes maturing in 2027 and reshape its debt schedule. This refinancing news comes after a busy few months for the company, including the grand opening of Six Flags Qiddiya City and decisions around its Six Flags Over Texas stake. The company’s share price has experienced a significant decline over the past year, with a 1-year total shareholder return of -65.62%. However, the 1-day share price return of 4.25% and 30-day share price return of 6.91% suggest that the company may be experiencing a turnaround.
Analyzing the Company’s Share Price and Valuation
The company’s share price is still well below its value from a year ago, trading at a large discount to some analyst targets and intrinsic estimates. The most popular narrative suggests that the company is 38.9% undervalued, with a fair value of $26.08 per share. This narrative is based on the company’s improving margins, sturdier free cash flow, and a future earnings profile that looks very different from today. The story assumes that revenue, earnings, and profit margins will all shift meaningfully over the next few years, supporting a higher future P/E multiple than today. However, high leverage, with net debt of about $5.3 billion, and weather-driven attendance volatility could quickly undermine the margin and cash flow improvements this story assumes.
Understanding the Risks and Rewards
Investors should be aware of the key risks to the Six Flags Entertainment narrative, including high leverage and weather-driven attendance volatility. These risks could quickly undermine the company’s margin and cash flow improvements, making it essential for investors to carefully consider these factors before making a decision. On the other hand, the company’s improving margins, sturdier free cash flow, and future earnings profile suggest that there may be significant rewards for investors who are willing to take on the risks. Investors can build their own custom thesis using a few minutes of their time, allowing them to test their assumptions and create a personalized investment strategy.
Building a Custom Thesis
Investors who want to create a custom thesis for Six Flags Entertainment can do so using a few minutes of their time. This allows them to test their assumptions and create a personalized investment strategy that takes into account their individual goals and risk tolerance. A great starting point for Six Flags Entertainment research is an analysis highlighting 3 key rewards and 2 important warning signs that could impact the investment decision. Investors can also use a screener to spot fresh ideas before everyone else catches on, allowing them to stay ahead of the curve and make informed investment decisions.
Conclusion and Next Steps
In conclusion, Six Flags Entertainment’s refinancing news and share price movement suggest that the company may be experiencing a turnaround. However, investors should be aware of the key risks and rewards associated with the company’s narrative, including high leverage and weather-driven attendance volatility. By building a custom thesis and carefully considering these factors, investors can make informed decisions and create a personalized investment strategy that meets their individual needs. Additionally, investors can use a portfolio companion tool to connect an unlimited number of portfolios, track the fair value of their stocks, and receive alerts to new warning signs or risks via email or mobile.
