Over the past six months, United Parks & Resorts’s stock price fell to $44.05. Shareholders have lost 18.6% of their capital, disappointing when considering the S&P 500 was flat. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Given the weaker price action, is now an opportune time to buy PRKS? Find out in our full research report, it’s free.

Why Does United Parks & Resorts Spark Debate?

Parent company of SeaWorld and home of the world-famous Shamu, United Parks & Resorts (NYSE: PRKS) is a theme park chain featuring marine life, live entertainment, roller coasters, and waterparks.

Two Positive Attributes:

1. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

United Parks & Resorts’s EPS grew at an astounding 39.1% compounded annual growth rate over the last five years, higher than its 5.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

2. New Investments Bear Fruit as ROIC Jumps

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. United Parks & Resorts’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

One Reason to be Careful:

Inability to Grow Visitors Points to Weak Demand

Revenue growth can be broken down into changes in price and volume (for companies like United Parks & Resorts, our preferred volume metric is visitors). While both are important, the latter is the most critical to analyze because prices have a ceiling.

Over the last two years, United Parks & Resorts failed to grow its visitors, which came in at 3.39 million in the latest quarter. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests United Parks & Resorts might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

Final Judgment

United Parks & Resorts’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 9.1× forward P/E (or $44.05 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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