SeaWorld Makes an IPO Splash, Looks to Go Higher

Shamu-hostage holder (I mean, caretaker) SeaWorld Entertainment has, so far, navigated the IPO waters with the elegance and grace of a soon-to-be-profitable dolphin. In just over a month since its market debut, SeaWorld has given investors a near 14% return. Finally, after years of taking your children to the hellishly delightful theme parks and paying $14 for a disappointing burger, your efforts are paying off. Let's take a look at the company's first public earnings release and see if its time to jump aboard this fast-sailing ship.

Earnings splash!
The owner of 10 Busch Gardens and SeaWorlds around the globe, SeaWorld Entertainment was spun out as a stand-alone company from buyout firm Blackstone, and while the theme-park business has not always been the most lucrative, it's become a much more attractive business in this economy as families go from European Vacation to Wally World.

First-quarter revenue grew 12% over the past year's to $26.2 million. Adjusted EBITDA grew substantially -- by $17.3 million to $11.1 million (last year the company was EBITDA negative at a loss of $6.2 million). Still, the bottom line remained negative at a loss of $40.4 million, or $0.49 per share. In the prior year's quarter, the company lost an additional $4.8 million for a total loss of $0.55 per share.

By most metrics, things appear to be improving dramatically for the theme park operator. On a per-attendee basis, revenue jumped 10%, along with a 2% increase in overall attendance. SeaWorld generated $24.3 million in operating cash flow, yet remained free cash flow negative due to large capital expenditures.

Looking ahead, growth remains attractive. For the full year, the company is expecting $1.46 billion to $1.49 billion in revenue, along with adjusted EBITDA (note that it's positive) in the range of $430 million to $440 million. Part of the earnings growth will likely come from the Antarctica: Empire of the Penguin realm at SeaWorld Orlando, opening this Friday. The project is the company's largest expansion in its history.

What does it all mean?
So the company is doing better and has launched a successful IPO from former parent Blackstone, but is the stock attractive?

The big periods for this business are quarters two and three. This summer, analysts expect American leisure travel to be at its highest levels in many years. With the new installment at the park in Orlando, along with a regional park acquisition in San Diego, SeaWorld should have substantial headwinds in the short term, with continued growth in the medium term. Much of this, of course, is already factored into management's provided guidance.

As far as valuation goes, SeaWorld currently has an enterprise value in the neighborhood of $5.24 billion, giving a forward EV/EBITDA of 12.19 on the low end, and 11.91 on the high end of guidance. For comparison, recently successful Six Flags trades at an EV/EBITDA of 13.55. Both companies pay a dividend, though SeaWorld's $0.80 (a little over 2%) per-share dividend is not yet in effect.

Given the favorable tailwinds and its moderate discount to peers, SeaWorld is an intriguing play on the recovering American economy and a good blend between destination tourist spots and regional, weekender family trips.

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