Land & Buildings Investment Management's Strategic Outlook on Six Flags Entertainment Corporation

Land & Buildings Investment Management has long emphasized the importance of identifying undervalued infrastructure plays in sectors with durable cash flow potential. In the entertainment industry, where capital intensity and operational leverage create fertile ground for strategic repositioning, Six Flags Entertainment Corporation (SIX) emerges as a compelling case study. Despite its recent challenges, including a post-merger integration headache and a deleveraging burden, the company's financials and valuation metrics suggest it is being priced as a distressed asset rather than a high-conviction infrastructure play.

Financial Performance: A Tale of Two Years

Six Flags' 2023 results underscored its operational resilience. The company generated $1.426 billion in revenue and $462 million in Adjusted EBITDA, though net income plummeted to $39 million from $101 million in 2022, reflecting higher interest expenses and merger-related costs Six Flags Reports Fourth Quarter and Full Year 2023 Performance^[2]. By Q2 2025, however, the narrative darkened. The combined entity reported a $100 million net loss, driven by a $126 million drag from legacy Six Flags operations, while attendance fell 9% to 14.2 million guests due to adverse weather Six Flags Reports Fourth Quarter and Full Year 2023 Performance^[2]. Yet, these short-term headwinds mask a critical reality: Six Flags' parks remain cash flow generators. Its Adjusted EBITDA of $462 million in 2023, despite a $2.365 billion debt load, demonstrates the durability of its infrastructure assets Six Flags Reports Fourth Quarter and Full Year 2023 Performance^[2].

Valuation Metrics: A Discount to Industry Averages

Six Flags' valuation metrics starkly contrast with industry benchmarks. As of December 31, 2023, the company traded at a P/E ratio of 15.56, significantly below the U.S. entertainment industry's average P/E of 60x US Amusement and Theme Park Market Size, Share^[5]. Similarly, its P/S ratio of 0.67 lags behind the industry's 1.65–3.37 range Six Flags Entertainment (FUN) Statistics & Valuation^[1]. These discrepancies suggest the market is pricing Six Flags for bankruptcy rather than growth. For context, the entertainment industry's average debt-to-EBITDA ratio is 2.31 Average net debt to EBITDA ratio by industry^[3], while Six Flags' debt-to-EBITDA of 8.07 (via its ticker FUN) and a negative debt-to-equity ratio of -4.84 Average net debt to EBITDA ratio by industry^[3] highlight its leverage challenges. However, these metrics also present an opportunity: at a 15.56 P/E, Six Flags is trading at less than a quarter of its sector's multiple, implying a margin of safety for investors who believe in its long-term cash flow potential.

Strategic Catalysts: Deleveraging and Synergies

The company's strategic roadmap offers further optimism. Six Flags has committed to deleveraging through asset sales and $90 million in merger-related cost synergies by year-end 2025 Six Flags Reports Fourth Quarter and Full Year 2023 Performance^[2]. Its $432.7 million in revolving credit availability and $5.3 billion in long-term debt, while daunting, position it to weather short-term volatility Six Flags Earnings Q2 2025 - Report^[4]. Management's guidance for $860–$910 million in Adjusted EBITDA for 2025, assuming flat attendance in the second half, signals confidence in operational normalization Six Flags Reports Fourth Quarter and Full Year 2023 Performance^[2]. Additionally, the amusement park sector itself is poised for growth, with a projected 3.51% CAGR from 2025–2030 driven by subscription-based ticket models and increased consumer spending US Amusement and Theme Park Market Size, Share^[5].

Risks and Realities

Critics will point to Six Flags' recent net loss of $483.64 million and a ROE of -63.18% as red flags Six Flags Entertainment (FUN) Statistics & Valuation^[1]. However, these metrics conflate short-term integration costs with long-term infrastructure value. The company's parks, located in prime real estate across 16 U.S. locations, represent a fixed-cost asset base that can scale with attendance. Moreover, its active pass base of 6.7 million units, despite a 8% decline, remains a recurring revenue engine Six Flags Reports Fourth Quarter and Full Year 2023 Performance^[2].

Conclusion: A High-Conviction Play

For Land & Buildings Investment Management, Six Flags embodies the classic value-in-peril thesis. Its infrastructure assets—16 amusement parks, 200+ rides, and a 6.7 million passholder base—are undervalued by a market focused on near-term losses. At a P/E of 15.56 and a P/S of 0.67, the company trades at a discount to its sector's historical averages, offering a margin of safety for investors who can stomach short-term volatility. As Six Flags executes its deleveraging plan and realizes cost synergies, the path to a normalized Adjusted EBITDA multiple of 8–10x appears achievable, unlocking significant upside for long-term holders.