The Best Staycation Theme Park Stock?

The CEO of theme park stock Cedar Fair, L.P. (NYSE: FUN) recently gave an AP interview where he pointed out that people are taking staycations by staying closer to home since the economic downturn, a trend that has boosted his business and one that he expects to continue – meaning investors might want to start taking a look at his company along with other theme park stocks like Six Flags Entertainment Corp (NYSE: SIX) and The Walt Disney Company (NYSE: DIS) (Note: SeaWorld has filed to also go public). In the interview, CEO Matt Ouimet said that Cedar Fair, L.P.’s theme parks generally draw most of their visitors from within a couple of hundred mile radius and he thinks the trend towards staycations will continue because its less complicated and expensive to drive to a theme park than take a long distance vacation.

Such a trend would first be good news for Cedar Fair, L.P. as it made the mistake of buying Paramount Parks Inc. and its five theme parks in 2006 – right before the economic downturn. That $1.24 billion deal left Cedar Fair, L.P. saddled in debt (long-term debt currently stands at $1.5 billion), but revenue has been rising since 2009 plus the company has reported net income of $72.16M (2011), a net loss of $31.57M (2010) and net income of $35.43M (2009) and $5.71M (2008). Right now, Cedar Fair, L.P. owns 15 entertainment sites that includes 11 amusement parks and four water parks plus its making additional investments in these sites to keep visitors coming back for more. For investors though, it should be noted that Cedar Fair, L.P. has a reasonable valuation as it has a trailing P/E of 17.95 and a forward P/E of 15.42 plus it pays a forward dividend of $1.60 for a dividend yield of 4.40%. Cedar Fair, L.P. also has a market cap of $2 billion plus the stock is up 58.2% over the past year and up 72.9% over the past five years.

Meanwhile, Six Flags Entertainment Corp is the world's largest amusement park corporation based on quantity of properties as it owns and operates 19 parks, of which 17 are located in the USA, one in Mexico City and one in Montreal. The Company holds exclusive long-term licenses for theme park usage of certain Warner Bros. and DC Comics characters like Bugs Bunny, Daffy Duck, Tweety Bird, Yosemite Sam, Batman and Superman plus the Company has certain rights to use Hanna-Barbera and Cartoon Network characters like Yogi Bear, Scooby-Doo and The Flintstones. However, it should be noted that during the recession, Six Flags Entertainment Corp was forced into bankruptcy in large part due to cash flow, debt and management problems dating back several years rather than any drop in attendance. Six Flags Entertainment Corp would emerge from bankruptcy in 2010 and issue new stock that is up 55.2% over the past year and up 240% since May of 2010. Right now, Six Flags Entertainment Corp has a trailing P/E of 32.32 and a rather steep forward P/E of 28.95  - which gives it a rather steep valuation compared with Cedar Fair, L.P. It also has a forward dividend of $3.60 for a dividend yield of 5.7%.

Finally, The Walt Disney Company is obviously more than just about Disneyland as the company has five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive media. The Walt Disney Parks and Resorts segment has five world-class vacation destinations with 11 theme parks and 43 resorts in North America, Europe and Asia plus a sixth destination under construction in Shanghai. In addition, the Disney Cruise Line has four ships; the Disney Vacation Club has 11 properties and more than 500,000 individual members; and Adventures by Disney provides guided family vacations to destinations around the globe. Investors should note that last quarter, The Walt Disney Company’s Cable Networks and Parks and Resort segments drove results as the latter's revenue was up 9% and operating income was up 18%. However, it was The Walt Disney Company’s international parks and resorts that had the best growth performance while domestic results were in-line with the previous year’s results. The Walt Disney Company has a trailing P/E of 16.22 and a forward P/E of 13.19 plus a forward P/E of $0.75 for a forward dividend yield of 1.5%. The Walt Disney Company is also up 27.2% over the past year and up 63.1% over the past five years.

The Bottom Line. Investors might want to stay clear of Six Flags Entertainment given its rather high P/E verses its peers, but Cedar Fair, L.P. is worth taking a closer look at by investors who want to cash in on the trend towards staycations and The Walt Disney Company could be a bet on a better economy – outside the USA.