Six Flags (NYSE: FUN) inventory soared 7% by 11:25 a.m. ET Tuesday, after Reuters reported there’s an activist investor push brewing to get Six Flags to promote itself.
This information comes lower than two weeks after Six Flags inventory surged on information of a extra restricted sale — of seven Six Flags amusement parks.
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Six Flags’ large increase earlier this month got here from its announcement that promoting seven “non-core” parks would increase $331 million, which Six Flags might then reinvest in its extra worthwhile parks. In an analyst be aware urging buyers to purchase the inventory, Stifel analyst Steven Wieczynski famous that the sale would additionally lighten Six Flags’ capex load, thereby slicing prices whereas boosting earnings.
Evidently’s not ok for some buyers, although.
As Reuters stories immediately, activist investor Jana Companions is pushing Six Flags’ board to “reverse course” on its turnaround efforts, and as a substitute “interact with recognized purchaser curiosity in Six Flags.”
Would that be a good suggestion? Valued at $1.7 billion in market capitalization, however carrying about $5.3 billion in web debt, Six Flags inventory has an enterprise worth of about $7 billion. That provides the inventory a price-to-sales ratio of about 2.25x.
That is nearly precisely the identical valuation given to the 800 lb. gorilla of the amusement parks business, Walt Disney (NYSE: DIS). However Disney is a worthwhile enterprise, incomes $12.2 billion on its income final 12 months. Six Flags is not worthwhile.
Granted, slicing prices and enhancing gross sales by reinvesting within the enterprise might enhance Six Flags’ enterprise. Nevertheless it may additionally fail. Given the danger, promoting Six Flags outright is likely to be the smarter name.
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