It's the most wonderful time of the year, which means children of all ages are busy mailing their letters to Santa and parents are hunting for the best bargains to fill stockings.
Despite the uncertainty caused by the Covid-19 pandemic this year, the National Retail Federation reported that consumers are still looking to spread some holiday cheer as it expects seasonal sales to increase between 3.6% and 5.2% from 2019 numbers.
As such, value investors may still find some treasures among toy manufacturers this Christmas. While these companies have been impacted by the pandemic due to disruptions in the retail space, thereby curbing sales, their products remain popular and in demand among children and adults.
According to the GuruFocus All-in-One Screener, popular toymakers in the U.S. include Build-A-Bear Workshop Inc. (BBW, Financial), Funko Inc. (FNKO, Financial), Hasbro Inc. (HAS, Financial), Jakks Pacific Inc. (JAKK, Financial) and Mattel Inc. (MAT, Financial).
Build-A-Bear
The Overland, Missouri-based company, which is known for selling build-it-yourself teddy bears and other customized stuffed animals, has a $71.66 million market cap; its shares were trading around $4.49 on Friday with a forward price-earnings ratio of 14.96, a price-book ratio of 1.21 and a price-sales ratio of 0.25.
With a GF Value of $3.88 and a price-to-GF Value ratio of 1.16, the stock is modestly overvalued currently. The new valuation metric is based on historical valuation multiples, an adjustment factor determined by the company's past returns and growth as well as future estimates of the business' performance.
GuruFocus rated Build-A-Bear's financial strength 3 out of 10. The Altman Z-Score of 0.92 warns the company could be in danger of going bankrupt if it does not improve its liquidity position.
The company's profitability did not fare much better, scoring a 4 out of 10 rating on the back of negative margins and returns that underperform a majority of competitors. Build-A-Bear also has a low Piotroski F-Score of 3, which suggests operating conditions are in poor shape, and the predictability rank of one out of five stars is on watch as a result of revenue per share declining over the past 12 months. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
With a 1.85% stake, Jim Simons (Trades, Portfolio)' Renaissance Technologies is currently the only guru invested in the stock.
Funko
Headquartered in Everett, Washington, the company, which makes licensed pop culture collectibles like vinyl figurines and bobbleheads, has a market cap of $571.49 million; its shares were trading around $11.51 on Friday with a a price-book ratio of 1.8 and a price-sales ratio of 0.65.
According to the GF Value of $11.38 and price-to-GF Value ratio of 1.01, the stock is fairly valued currently.
Funko's financial strength was rated 3 out of 10 by GuruFocus. Along with low debt ratios, the Altman Z-Score of 1.78 warns the company could be in danger of going bankrupt if it does not improve its liquidity position.
The company's profitability scored a 4 out of 10 rating on the back of negative margins and returns that overall outperform over half of its industry peers. Funko also has a low Piotroski F-Score of 3 and revenue per share has declined over the past year.
Hotchkis & Wiley holds 1.29% of the company's outstanding shares.
Hasbro
The Pawtucket, Rhode Island-based toymaker, which owns the Play-Doh, Nerf, My Little Pony and Monopoly brands, among others, has a $10.79 billion market cap; its shares were trading around $92.71 on Friday with a price-earnings ratio of 32.41, a price-book ratio of 4.58 and a price-sales ratio of 2.43.
Based on the GF Value of $93.29 and price-to-GF Value ratio of 0.99, the stock appears to be fairly valued currently.
Hasbro's financial strength was rated 4 out of 10 by GuruFocus. As a result of the company issuing roughly $3.1 billion in new long-term debt over the past three years, it has inadequate interest coverage. In addition, the Altman Z-Score of 2.37 indicates the company is under some pressure.
The company's profitability fared better with a 7 out of 10 rating. Although the operating margin is in decline, Hasbro has good returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6, which implies business conditions are stable. The one-star predictability rank is on watch, however, as a result of the toymaker posting a loss in operating income and seeing a decline in revenue per share growth over the past three years.
With 0.14% of outstanding shares, Jeremy Grantham (Trades, Portfolio) is the company's largest guru investor. Pioneer Investments (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also have positions in the stock.
Jakks Pacific
Based in Santa Monica, California, the company, whose products range from action figures and dolls to visual electronics and handheld games, has a market cap of $25.18 million; its shares were trading around $5.09 on Friday with a price-book ratio of 2.01 and a price-sales ratio of 0.04.
With a GF Value of $3.74 and a price-to-GF Value ratio of 1.38, the stock is significantly overvalued currently.
Jakks Pacific's financial strength and profitability were both rated 4 out of 10 by GuruFocus. Due to issuing approximately $16.08 million in new long-term debt over the past three years, the company has weak interest coverage. The Altman Z-Score of 1.04 warns the company is in distress and could potentially go bankrupt if its liquidity does not improve. The weighted average cost of capital also eclipses the return on invested capital, suggesting issues with profitability and creating value.
While the operating margin is outperforming over half of its industry peers, the company's returns are negative and underperforming. Jakks Pacific, however, is being supported by a moderate Piotroski F-Score of 6 and a one-star predictability rank even though it has recorded a loss in operating income as well as declines in revenue per share over the past several years.
Jim Simons (Trades, Portfolio)' Renaissance Technologies has the largest stake in Jakks with 2.4% of outstanding shares.
Mattel
The El Segundo, California-based manufacturer of Barbie, Fisher-Price, Hot Wheels and American Girl products has a $6.34 billion market cap; its shares were trading around $18.22 on Friday with a forward price-earnings ratio of 31.93, a price-book ratio of 15.68 and a price-sales ratio of 1.44.
According to the GF Value of $12.82 and price-to-GF Value ratio of 1.43, the stock is significantly overvalued currently.
GuruFocus rated Mattel's financial strength 4 out of 10. As a result of issuing $358.12 million in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 2.22 indicates the company is under some pressure since it has recorded operating income losses and declining revenue per share over the past several years.
The company's profitability scored a 5 out of 10 rating, driven by margins and returns that outperform over half of its competitors. Mattel also has a moderate Piotroski F-Score of 5 and a one-star predictability rank.
Of the gurus invested in Mattel, PRIMECAP Management (Trades, Portfolio) has the largest position with 13.84% of outstanding shares. Other guru shareholders are Mason Hawkins (Trades, Portfolio)' Southeastern Asset Management, Dodge & Cox, John Rogers (Trades, Portfolio), the T Row Price Equity Income Fund, Steven Cohen (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Disclosure: No positions.
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