Six Flags Entertainment Corporation (SIX)
Six Flags Entertainment Corporation prides itself on entertaining millions of families each year as the worlds largest regional theme park company with 18 theme parks spread across North America (Six Flags, 2013). Six Flags primary source of revenue comes from providing world-class entertainment to families and individuals who pay for admission into its parks to ride its coasters, themed rides, and water park attractions. Six Flags has had its ups and downs during its 50-year history but over the past three years it has remained a strong company with total assets increasing year over year. The following analysis will show the financial health and well being of Six Flags Entertainment Corporation.
Analysis of Financial Ratios
Six Flags had a solid gross profit margin of 92.51% in 2012 and this ratio has increased slightly over the past three years when it was 91.89% in 2010. This is a good indicator that Six Flags should have a healthy bottom line and it should have plenty of money left over to spend on other business operations and expenses. When it comes to operating profit margin, Six Flags has increased from 9.99% in 2010 to 19.12% in 2012. This ten percent increase in the operating profit margin could be a good indication that sales are currently outpacing cost. This is great for Six Flags because it means that sales are increasing while at the same it is able to keep its costs in check.
With gross profit margin and operating profit margin both on solid footings it appears that Six Flags net profit margin is like a roller coaster ride. In 2010, Six Flags had a net profit margin of 61.37% and in 2011 its net profit margin plummeted into the red at negative 2.24%. This drop of 65% is substantial and does not seem to follow the same positive trend seen with gross profit margin and operating profit margin. It is possible that this drop is just an anomaly experienced by Six Flags as its net profit margin bounced back to a healthy 33.07% in 2012. Six Flags spends millions of dollars a year on research and development and millions of dollars creating new attractions within its parks. The substantial cost involved with developing and building new attractions might be a contributing factor in the drop of net profit margin. I would anticipate the net profit margin to recover and increase once any new attraction is up and running and creating increased park attendance.
Six Flags has been able to increase its operating cash flow / current liabilities ratio from 2010 to 2012. In 2010 Six Flags operating cash flow / current liabilities ratio was .316, which is an indication that it could potentially have trouble meeting is current liabilities. Six Flags has been able to increase its operating cash flow / current liabilities ratio to 2.043 in 2012 giving it a better chance at meeting its current liabilities going forward. Six Flags has also been able to improve its operating cash flow / current...