Why Six Flags Entertainment Stock Just Popped

Six Flags (NYSE: FUN) banal soared 7% done 11:25 a.m. ET Tuesday, aft Reuters reported there's an activistic capitalist propulsion brewing to get Six Flags to merchantability itself.

This quality comes little than 2 weeks aft Six Flags banal surged connected quality of a much constricted merchantability -- of 7 Six Flags amusement parks.

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Six Flags' large boost earlier this period came from its announcement that selling 7 "non-core" parks would rise $331 million, which Six Flags could past reinvest successful its much profitable parks. In an expert enactment urging investors to bargain the stock, Stifel expert Steven Wieczynski noted that the merchantability would besides lighten Six Flags' capex load, thereby cutting costs portion boosting profits.

It seems that's not bully capable for immoderate investors, though.

As Reuters reports today, activistic capitalist Jana Partners is pushing Six Flags' committee to "reverse course" connected its turnaround efforts, and alternatively "engage with known purchaser involvement successful Six Flags."

Would that beryllium a bully idea? Valued astatine $1.7 cardinal successful marketplace capitalization, but carrying astir $5.3 cardinal successful nett debt, Six Flags banal has an endeavor worth of astir $7 billion. That gives the banal a price-to-sales ratio of astir 2.25x.

That's astir precisely the aforesaid valuation fixed to the 800 lb. gorilla of the amusement parks industry, Walt Disney (NYSE: DIS). But Disney is simply a profitable business, earning $12.2 cardinal connected its gross past year. Six Flags is not profitable.

Granted, cutting costs and improving income by reinvesting successful the concern could amended Six Flags' business. But it mightiness besides fail. Given the risk, selling Six Flags outright mightiness beryllium the smarter call.

Before you bargain banal successful Six Flags Entertainment, see this:

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