Parks! America Business Quality Report (PRKA) - (2018)
Parks! America, Inc. is an entertainment company focused on the theme park space. This Parks America business quality report explains the Bad Quality ranking that Parks America earned under my quality ranking system.
Basic Company Information
Company Name: Parks! America, Inc.
Ticker: PRKA
Quality Ranking: Average (3)
Primary Reason: No Moat
Size: Nano-Cap
Last Updated: 09/29/2018
Key Points:
Entertainment is a highly competitive industry that requires a moat to earn sustainably high returns on capital
Parks! America does not possess a moat in this industry
While highly differentiated from peers, there is no evidence of pricing power
Parks! America’s Business Quality Description:
Parks America operates two theme parks in the United States. They are branded “Wild Animal Safari Park.” One park operates in Pine Mountain, Georgia and the other in Strafford, Missouri. Each of these parks is fairly small and occupy a unique niche of entertainment for the local area. Apparently, school trips are one of the key sources of revenue.
The Wild Animal Safari Park is basically a zoo with a twist. You’re able to drive your car or a rented car through the safari with the animals all around you. Instead of cages, the animals are free to come up directly to your vehicle for your family to feed. Parks America earns revenue through ticket sales, feed sales, and souvenirs. Based on my analysis, it seems that a significant portion of the revenue comes from ticket and feed sales.
One noted observation is that cars tend to become beat up over time by the animals. This is a risk for anyone who drives their own vehicle into the park and could lead to negative reviews for the company.
Positive aspects of the business
The business appears to be relatively low maintenance. Customers often perform the act of feeding the animals themselves, eliminating the need for zookeepers to feed the animals. The safari nature of the park also limits physical item maintenance. Instead of having to maintain cages and pens, the animals are simply given large space to roam free. There are some cages, but the key attraction is the safari.
In addition, the animals are able to maintain their population through standard reproduction. This is even a source of a revenue as the company is able to sell surplus animals to other zoos and safaris.
Negative aspects of the business
In my due diligence, I read customer reviews. There are two main negative responses:
Prices are high
Animal standards of living are low
Now, I haven’t verified either of those claims myself. Nor, are those claims representative of customer reviews. Many reviews are quite positive and specifically went against these statements. However, those that don’t like the Wild Animal Safari Park, generally stick to these two claims. This is a concern from a business model perspective. We are able to learn two things:
Parks America doesn’t have pricing power. They’re already losing customers because of pricing.
The company might be under maintaining the property. This could result in temporarily overstated profits as additional maintenance might be required in the future to maintain current business. Not a good sign.
Why Parks! America doesn’t deserve a lower quality rating
The next lowest quality rating is “Bad Business” in my quality ranking system. While Parks America is by no means a good business, they avoid a bad rating because the business does not appear to be capital intensive. The underlying business should be relatively low maintenance. There is no reason that Wild Animal Safari parks cannot earn their cost of capital when properly maintained.
Why Parks! America doesn’t deserve a higher quality rating
The next highest quality rating is “High-Quality Business” in my quality ranking system. A moat is required to be considered a high-quality business. Not only does Parks America not have a moat, but they also have customers actively complaining about high prices. There is a clear lack of pricing power, which is the primary indicator of a high-quality business.
Note: This is the original analysis of Parks! America that I completed in 2018. An updated quality analysis will be released next week.
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