Wan-Eyed JAKKS

After smashing through Wall Street profit projections for three consecutive quarters, toymaker JAKKS Pacific (Nasdaq: JAKK  ) hit a wall. Net sales inched 5% higher to $129.5 million, while earnings dipped to $0.17 per share. Analysts, no doubt tired of being humbled, had lofty expectations of $0.24 per share on a 6% uptick in sales.

The good news is that this is the seasonally forgettable second quarter. JAKKS expects to make up the difference with healthy shipments to retailers as we head into the holidays.

"With an exciting roster of new products hitting retail late summer and early fall, we are very comfortable with our previously issued full-year guidance of $800 million in net sales and net income of $75.8 million, or $2.39 per diluted share," notes CEO Jack Friedman in this morning's press release. That's good, since the company's reaffirmed guidance slightly exceeds Wall Street's 2007 projections.

JAKKS saw strength in its action figure, dress-up, and role-playing toys. The company also makes electronic games and playthings for pets. With a cash-rich balance sheet, JAKKS is looking to invest in brand acquisitions, and it'll continue to expand its licensing deals as well. Ties to Disney (NYSE: DIS  ) , Nintendo (OTC BB: NTDOY.PK), and World Wrestling Entertainment (NYSE: WWE  ) have served the company well in the past. Whether it's Pokemon or Disney's latest hit Hannah Montana, JAKKS has no problem cashing in on properties to which kids are flocking.

The company's report may come as a downer after Hasbro's (NYSE: HAS  ) blowout second quarter earlier this week. That was a unique situation, though, with the Transformers movie buzz breathing new life into an old toy line.

With its profit outlook intact, JAKKS is now trading for just 10 times this year's guidance after this morning's lower opening. That's a bargain compared to Hasbro and Mattel (NYSE: MAT  ) , each trading at 15 times this year's bottom-line estimate.

That should keep today's share-price decline in check after the initial dip. JAKKS may be a disappointment today, but it's at a bargain price compared to its potential future.

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Longtime Fool contributor Rick Munarriz wonders who will have the hot toys for the 2007 holiday season. He does not own shares in any of the companies in this story, save for Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy will never toy with you.