You Don't Know JAKKS

Playing games with Wall Street can sometimes pay off nicely. Shares of JAKKS Pacific (Nasdaq: JAKK) opened 15% higher after the company posted market-spanking preliminary results.

The toy maker expects that fourth-quarter profits more than doubled to $0.84 a share before stock-based compensation and acquisition-related charges. Revenue soared 43% higher to hit $238.3 million.

Things are going to get even better here in 2007. Earnings for the whole year are projected to clock in at $2.39 a share on revenue of at least $800 million. Wall Street is the one with toys in the attic (or should I say basement?), expecting a profit of just $2.24 per share on $765 million in generated revenue.

From a value perspective, JAKKS is looking pretty good. It is trading at less than 11 times forward earnings. The 2007 multiples for market leaders Mattel (NYSE: MAT) and Hasbro (NYSE: HAS) are 17 and 18, respectively. LeapFrog (NYSE: LF) won't even turn a profit this year.

Yes, JAKKS isn't loaded with the same portfolio of proprietary product lines as Mattel and Hasbro, but it's done just fine putting out licensed playthings. I had singled out the stock four years ago as one of my "10 Stocks Under $10" for 2003, just as it was bouncing back from its former glory days as a maker of wrestling toys. JAKKS is aiming at an even younger crowd these days, with some of its licenses tied to Viacom (NYSE: VIA) and Disney (NYSE: DIS) properties.

It's also serving up products for the older-toy crowd -- its new XPV line of remote-control speedsters that can take off and fly should get these kids buzzing. But that's pretty much the point with JAKKS these days. It has become a well-rounded toy maker. And given its dirt cheap valuation, it may be a stock that investors should kick around a little bit to see if it takes off for them, too.

Hasbro and Disney are recommendations for Motley Fool Stock Advisor subscribers. To find out what other companies have been selected for the market-crushing newsletter service, take a free 30-day trial today. Mattel is a former Inside Value pick.

Longtime Fool contributor Rick Munarriz really wants to see if those XPVs can clear a 20-story building as advertised. He does own shares in Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.