Back at the end of June, Build-a-Bear Workshop (NYSE:BBW) lowered its earnings forecast for the year. As a result, investors punished the stock, sending it close to its lowest levels over the past year. The shares recovered a bit, but sunk once again after the company released second-quarter earnings last week. What's a Fool to make of the recent bearish developments?

For the quarter, sales increased an impressive 27%, but same-store sales lagged management's expectations, falling 4.4% in North America. Diluted earnings also fell by 12%, to $0.15 per share, though they still beat the figure that analysts had lowered after the June warning. Earnings included $0.15 in acquisition dilution from purchasing U.K.-based Bear Factory and stock compensation costs of $0.02. Management also reaffirmed June's guidance of $1.44-$1.53 per share in earnings for the year. However, the company expects comps difficulties in this period.

Build-a-Bear has grown rapidly over the past few years, as children flocked to its primarily mall-based stores. But the stock now trades below its October 2004 IPO price of $25. The company generates decent levels of cash flow and has no debt, since it can fund the expense of opening new stores with its operating cash flow. Can we expect similar growth and financial propriety going forward?

Right now, it's a bit difficult to discern how things are really going at the company, since the Bear Factory purchase accounted for a good chunk of sales growth, lowered earnings results for the quarter, and is affecting profit-margin reporting. The namesake stores still have a limited operating history, which makes it hard to tell whether the concept of letting children build their own stuffed animals is just a fad, or whether it will prove as durable as Lego bricks, Hasbro's (NYSE:HAS) G.I. Joe, or Mattel's (NYSE:MAT) Barbie dolls.

If the Build-a-Bear concept is here to stay, then the shares are a steal at 14-15 times projected earnings, especially since management plans to add at least another 100 stores to its existing 255. It will be easier to draw conclusions once the Bear Factory purchase is completely integrated, providing investors a better means for comparison. In other words, feel free to hibernate. There's no hurry on this bear.

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Fool contributor Ryan Fuhrmann has no financial interest in any other company mentioned. The Fool has an ironclad disclosure policy. Feel free to email Ryan with feedback or to discuss any companies mentioned further.