What happened
Shares of toy company Build-A-Bear Workshop (BBW 1.71%) skyrocketed on Thursday after the company reported record financial results for the second quarter. As of 9:50 a.m. ET today, Build-A-Bear stock was up about 19%. Earlier in the session, it was up even more and had briefly surpassed $30. For those keeping score, it was the first time the stock had been above $30 since 2007.
In the second quarter, Build-A-Bear's total revenue increased 8.5% year over year to a record $109 million. The company's profits were even better, with net income of $8.3 million. That was good for 43% growth and a 7.6% profit margin.
Build-A-Bear stock was left for dead at the start of the pandemic. But with results like these, it's easy to see why the stock is now up more than 1,200% over the last three years.
So what
As I just alluded to, Build-A-Bear was a cheap stock three years ago. With shares trading at a paltry 0.04 times trailing sales, the market was basically saying that it didn't expect the company to survive.
But as the chart below shows, Build-A-Bear has not only survived but thrived, achieving record revenue numbers. In part, this is due to management's successful efforts at marketing products toward teens and adults, expanding beyond a kid-centric opportunity.
BBW PS Ratio data by YCharts; PS = price to sales; TTM = trailing 12 months.
Now what
For fiscal 2023 (which ends in January 2024), Build-A-Bear expects to grow revenue by 5% to 7% year over year, which implies ongoing growth in the back half of the year. Moreover, it expects to grow profits at a slightly faster pace.
Build-A-Bear is growing, is profitable, and has no long-term debt. Trading at just nine times trailing earnings, the stock is still cheap. And if it can keep growing, even at a modest pace, it could have more upside ahead.
