NEW YORK (TheStreet) -- SeaWorld Entertainment, Inc. (SEAS) shares are up 1.9% to $29.67 this afternoon after being upgraded to "buy" from "neutral" by analysts at Longbow Research.
The firms $37 price target on the stock represents a potential 27% upside from SeaWorld's previous closing price.
The upgraded outlook was a valuation call based on better weather and cash flow potential.
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TheStreet Ratings team rates SEAWORLD ENTERTAINMENT INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate SEAWORLD ENTERTAINMENT INC (SEAS) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The share price of SEAWORLD ENTERTAINMENT INC has not done very well: it is down 19.19% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Hotels, Restaurants & Leisure industry. The net income has decreased by 22.5% when compared to the same quarter one year ago, dropping from -$40.36 million to -$49.43 million.
- The debt-to-equity ratio is very high at 2.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.32, which clearly demonstrates the inability to cover short-term cash needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, SEAWORLD ENTERTAINMENT INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for SEAWORLD ENTERTAINMENT INC is currently extremely low, coming in at 13.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -23.28% is significantly below that of the industry average.
- You can view the full analysis from the report here: SEAS Ratings Report