How High Can Cedar Fair Fly?

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Shares of Cedar Fair (NYSE: FUN  ) hit a 52-week high yesterday. Let's look at how it got here and see whether clear skies are ahead.

How it got here
If the economy is still struggling, you wouldn't know it from the screaming kids on roller coasters and the overpriced cotton candy sales at Cedar Fair's amusement parks. Consumers are spending more per visit, and attendance is even rising slightly.

The company said that through Labor Day the company's revenues are up 5% from a year ago to $881 million, driven by a 4% increase in spending per visit. Net income through the second quarter was up to $36.3 million from just $4.3 million a year ago. But the strong numbers in entertainment haven't been strictly a Cedar Fair phenomenon.

Theme-park owner Six Flags (NYSE: SIX  ) is experiencing a strong return of revenue since the depths of the recession. Cruise-line operator Carnival (NYSE: CCL  ) is experiencing even more growth, and Disney (NYSE: DIS  ) is reaching new highs. It's a good time to be in the entertainment business.

FUN Revenue TTM Chart

FUN Revenue TTM data by YCharts

If we look at the companies on a more fundamental basis, Cedar Fair seems to hold its own. The quarterly revenue growth is impressive, but some of that is due to an extra week in the second quarter. The company does have a strong return on assets and has the lowest forward P/E of the group.



Quarterly Revenue Growth

Return on Assets

Forward P/E

Cedar Fair 28.3 25.7% 7.9% 13.4
Six Flags 4.9 10.7% 4.4% 31.8
Carnival 1.3 -2.3% 3.2% 15.0
Disney 2.4 3.9% 7.5% 14.9

Source: Yahoo! Finance.

The question is: Can Cedar Fair's stock can continue moving higher?

What's next?
Cedar Fair has been on a great run since the depths of the recession, but I think there's still room to move higher. The company is steadily growing revenue, and the stock's valuation isn't anything to be scared of. Add in the fact that management expects a $2 distribution in 2013, which would be a 6% yield at the current price, and I think the stock can continue its charge higher.

Expectations may need to be reduced versus performance over the last two years, and investors need to keep an eye on the economy's overall health. If the economy improves, so will Cedar Fair, and I don't think a double-digit return in the next year is out of order.

The CAPS community isn't as high on the stock as I am, though, giving it a two-star rating. But only 14 out of 114 All-Stars who have rated the stock think it will underperform the market.

So, will the economy continue a slow rise and help companies like Cedar Fair? The election will play a big role, and we've identified four stocks that could skyrocket after we find out our new president. Find out more about this free report by clicking here.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services have recommended buying shares of Walt Disney. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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Related Tickers

10/21/2016 11:01 AM
FUN $57.39 Up +0.14 +0.24%
Cedar Fair, L.P. CAPS Rating: ****
CCL $46.59 Down -0.61 -1.29%
Carnival CAPS Rating: **
DIS $91.84 Down -0.20 -0.21%
Walt Disney CAPS Rating: *****
SIX $51.37 Down -0.18 -0.35%
Six Flags CAPS Rating: **