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Sydnee Gatewood
Sydnee Gatewood
Articles (741) 

5 Toymakers to Consider Putting Under Your Tree This Christmas

Several gurus have positions in these popular toy companies

December 11, 2018 | About:

It’s the most wonderful time of the year, which means children are busy writing and mailing their Christmas letters to Santa and parents are looking for the best bargains to fill stockings. According to a survey conducted by the American Research Group, U.S. shoppers are expecting to spend an average of $992 for gifts this holiday season, up from $983 in 2017.

Despite the recent uncertainty in the space due to the bankruptcy and closure of Toys ‘R’ Us stores this past summer, value investors may still find some treasures among toy manufacturers this Christmas.

According to the GuruFocus All-in-One Screener, popular toymakers in the U.S. include Build-A-Bear Workshop Inc. (NYSE:BBW), Funko Inc. (NASDAQ:FNKO), Hasbro Inc. (NASDAQ:HAS), Jakks Pacific Inc. (NASDAQ:JAKK) and Mattel Inc. (NASDAQ:MAT).

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 $76.21 million market cap; its shares were trading around $5.05 on Tuesday with a price-book ratio of 0.72 and a price-sales ratio of 0.21. GuruFocus notes these metrics are near five-year lows.

The median price-sales chart shows the stock is trading below its historical value.

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GuruFocus rated Build-A-Bear’s financial strength 6 out of 10. In addition to having a cash-debt ratio of 1.19, the Altman Z-Score of 3.66 suggests the company is in good fiscal standing. The company’s profitability and growth scored a 5 out of 10 rating. Although the company is weighed down by negative margins and returns that underperform competitors, it has a high Piotroski F-Score of 8, which indicates operations are healthy, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.

Of the gurus invested in Build-A-Bear, Point72’s Steven Cohen (Trades, Portfolio) has the largest position by far, holding 19.93% of outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Chuck Royce (Trades, Portfolio), Coatue Management LLC and Paul Tudor Jones (Trades, Portfolio) are also shareholders.

Funko

Headquartered in Everett, Washington, the company, which makes licensed pop culture collectibles like vinyl figurines and bobbleheads, has a market cap of $732.28 million; its shares were trading around $14.99 on Tuesday with a price-earnings ratio of 58.84, a price-book ratio of 4.84 and a price-sales ratio of 0.94.

According to the Peter Lynch chart, the stock is overpriced since it is trading higher than its fair value.

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Weighed down by poor interest coverage, Funko’s financial strength was rated 5 out of 10 by GuruFocus. In addition, the Altman Z-Score of 2.52 suggests the company is under some fiscal pressure as its revenue per share has declined over the last 12 months. The company’s profitability and growth fared even worse, scoring a 3 out of 10 rating despite having an operating margin that outperforms 52% of industry peers.

Simons’ Renaissance Technologies holds 1.1% 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 market cap of $10.79 billion; its shares were trading around $85.45 on Tuesday with a price-earnings ratio of 53.32, a price-book ratio of 5.74 and a price-sales ratio of 2.29.

Based on the Peter Lynch chart, the stock appears to be overvalued.

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Hasbro’s financial strength was rated 6 out of 10 by GuruFocus. Although the company has issued roughly $53.6 million in new long-term debt over the last three years, it is at a manageable level due to adequate interest coverage. In addition, the Altman Z-Score of 4.59 indicates the company is financially stable. The company’s profitability and growth scored an 8 out of 10 rating, driven by operating margin expansion, good returns and a moderate Piotroski F-Score of 5. The toymaker also has a 4.5-star business predictability rank. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 10.6% per year. The rank is on watch, however, as a result of the company posting a loss in operating income and seeing a decline in revenue per share growth over the last 12 months.

With 0.29% of outstanding shares, Tom Gayner (Trades, Portfolio) is the company’s largest guru investor. Pioneer Investments (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Cohen also own 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 $63.88 million market cap; its shares were trading around $2.19 on Tuesday with a price-book ratio of 1.18 and a price-sales ratio of 0.11.

The median price-sales chart shows the stock is trading below its historical value.

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GuruFocus rated Jakks Pacific’s financial strength 4 out of 10. Weighed down by a decline in revenue per share over the last 12 months and a low cash-debt ratio, the Altman Z-Score of 0.86 warns the company is at risk of going bankrupt. The company’s profitability and growth did not fare much better, scoring a 5 out of 10 rating as a result of negative margins and returns that underperform industry peers, a low Piotroski F-Score of 3, which indicates poor operating conditions, and a one-star business predictability rank.

Simons’ firm has the largest stake in Jakks with 7.28% of outstanding shares. Jones is also a shareholder.

Mattel

The El Segundo, California-based manufacturer of Barbie, Fisher-Price, Hot Wheels and American Girl products has a market cap of $4.49 billion; its shares were trading around $12.93 on Tuesday with a forward price-earnings ratio of 46.08, a price-book ratio of 6.73 and a price-sales ratio of 0.98.

According to the median price-sales chart, the stock is trading below its historical value.

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Mattel’s financial strength and profitability and growth were both rated 4 out of 10 by GuruFocus. As a result of issuing approximately $1 billion in new long-term debt over the last three years, the Altman Z-Score of 1.64 warns the company is in danger of going bankrupt. The company is also being hurt by negative margins and returns that underperform competitors and a low Piotroski F-Score of 2. The company also has a one-star business predictability rank, which is on watch as a result of operating income loss over the last three years and a decline in revenue per share over the last five years.

Of the gurus invested in Mattel, PRIMECAP Management (Trades, Portfolio) has the largest position with 14.7% 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, Cohen, Jerome Dodson (Trades, Portfolio), Pioneer and Mario Gabelli (Trades, Portfolio).

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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