A Recent Look at Six Flags (FUN) Valuation Following Authorized Probe, Weak Results, and CEO Exit

Something massive simply shook up Six Flags Entertainment (NYSE:FUN), prompting traders to take a more in-depth take a look at their portfolios. The legislation agency Pomerantz LLP has launched an investigation into potential securities fraud following Six Flags’ disappointing second quarter. This comes as the corporate diminished its full-year EBITDA steerage, citing a smaller season-pass base and unpredictable financial situations. In addition, longtime president and CEO Richard Zimmerman has introduced he’ll step down by year-end, including additional uncertainty at an already difficult second.

If you might have been following Six Flags’ story, you understand it has been something however easy crusing not too long ago. After a quick rally final week, the inventory has tumbled over the previous month and has seen its worth halve for the reason that begin of the 12 months. Over the previous 12 months the slide has been even steeper, with fading momentum pushed by recurring operational hiccups and recent administration questions, placing a cloud over near-term prospects.

So after a 12 months of sharp declines and now headline-grabbing authorized scrutiny, is Six Flags Entertainment trying like a traditional worth play, or is the market proper to remain cautious, already pricing in all of the dangers to return?

Most Popular Narrative: 23.7% Undervalued

The most generally adopted valuation narrative sees Six Flags as considerably undervalued in comparison with its projected future efficiency, with the present share value sitting nicely under analysts’ consensus honest worth.

Consolidation synergies from the Cedar Fair merger, ongoing portfolio optimization, and aggressive value self-discipline (concentrating on $120M in everlasting annual financial savings) are anticipated to structurally decrease the price base. This would increase internet margins and speed up deleveraging via extra strong free money move.

Curious what’s behind this bullish valuation? The numbers driving this value goal depend on daring assumptions about income rebounds, margin expansions, and a future revenue a number of sometimes seen in faster-growing industries. Want to find which estimate might make at present’s low cost appear like a uncommon alternative? The analysts are betting on a comeback story with shocking momentum shifts and impressive revenue projections baked into their math.

Result: Fair Value of $31.23 (UNDERVALUED)

Have a learn of the narrative in full and perceive what’s behind the forecasts.

However, persistent excessive debt and unpredictable climate disruptions might rapidly reverse momentum and problem the corporate’s path to sustained restoration.

Find out about the important thing dangers to this Six Flags Entertainment narrative.

Another View: Discounted Cash Flow Perspective

Taking one other angle, the SWS DCF mannequin additionally finds Six Flags buying and selling nicely under its calculated honest worth. This raises the query of whether or not the corporate’s fundamentals help such a robust margin of security, or if market sentiment is aware of one thing that fashions don’t.

Look into how the SWS DCF mannequin arrives at its honest worth.

Simply Wall St performs a reduced money move (DCF) on each inventory on the earth day by day (try Six Flags Entertainment for instance). We present all the calculation in full. You can observe the end in your watchlist or portfolio and be alerted when this adjustments, or use our inventory screener to find undervalued shares based mostly on their money flows. If you save a screener we even provide you with a warning when new corporations match – so that you by no means miss a possible alternative.

Build Your Own Six Flags Entertainment Narrative

If you see issues otherwise or need to dig deeper into the numbers, you’ll be able to rapidly form your personal perspective utilizing our information in only a few minutes. Do it your means.

An amazing start line in your Six Flags Entertainment analysis is our evaluation highlighting 3 key rewards and a couple of necessary warning indicators that might affect your funding choice.

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This article by Simply Wall St is basic in nature. We present commentary based mostly on historic information
and analyst forecasts solely utilizing an unbiased methodology and our articles should not meant to be monetary recommendation. It doesn’t represent a advice to purchase or promote any inventory, and doesn’t take account of your goals, or your
monetary state of affairs. We intention to convey you long-term centered evaluation pushed by basic information.
Note that our evaluation might not issue within the newest price-sensitive firm bulletins or qualitative materials.
Simply Wall St has no place in any shares talked about.

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