With a stock price of $1.55 at Monday's close, Genius Brands (NASDAQ:GNUS) is trading significantly below its 52-week high of $11.73. To new investors, this might look like a good opportunity to buy shares at a discount. But the stock is cheap for a reason: Its risks outweigh its potential rewards right now.

Despite enjoying many near-term catalysts for growth, Genius Brands has consistently failed to turn hype into sustainable value for shareholders. The company also faces revenue declines and spiraling expenses. Let's dig a little deeper to find out why this penny stock could sink your portfolio.

$100 bill on fire.

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An endless hype train

If there is anything the Genius Brands management team is good at, it's generating hype. The company has consistently overpromised and underdelivered on a plethora of new business ventures. 

Most recently, Genius Brands announced the debut of its Rainbow Rangers toys at Walmart and Amazon. This follows the hiring of Steven Banks, head writer of Nickelodeon's SpongeBob SquarePants, to work on the studio's new Stan Lee's Superhero Kindergarten show. Genius Brands is also working on its flagship Kartoon Channel! -- a platform its CEO describes as a "Netflix for kids but free".

In an Aug. 13 newsletter, CEO Andy Heyward pulled out all the stops to generate excitement for these new revenue opportunities, stating the following: "At Genius Brands, we think that Stan Lee's Superhero Kindergarten is so superior, that it would be very, very, hard for anyone to catch this fast-moving bullet train."

Heyward admits that he doesn't expect to report material revenue from Stan Lee's Superhero Kindergarten or the other two ventures until the first quarter of 2021, but he doesn't elaborate on how much revenue investors should expect. This is an important oversight, because Genius Brands has a track record of promising growth without delivering. Genius Brands' legacy shows like Rainbow Rangers and Llama Llama have both been renewed for additional seasons, but these positive developments have not led to sustainable sales growth for the company. 

In the second quarter, Genius Brands' revenue declined 73% from $1.22 million to just $0.334 million, while marketing and sales expenses increased 38% to $0.113 million. The company generated a net loss of $5.8 million in the quarter, though it has a strong balance sheet with $50 million in cash and zero debt, according to the most recent press release. 

So is Genius Brands a buy?

The short answer is no, Genius Brands is not a buy. Despite the company's near-term catalysts for growth, management has consistently failed to turn hype into tangible value for shareholders, and investors should wait to see results before they bet on this company. 

But with that being said, Genius Brands does have a strong balance sheet and many talented storytellers on its workforce -- so while the stock isn't a good investment right now, it could eventually become one in the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.