Yesterday, Motley Fool Stock Advisor pick Marvel Entertainment (NYSE:MVL) released earnings for the third quarter ended Sept. 30, 2007.

  • Third-quarter licensing revenue ballooned to $66 million from $28.3 million the year before, thanks mostly to the success of Spider-Man 3, which Sony (NYSE:SNE) released in May.
  • Similar licensing deals are in the works. Lions Gate (NYSE:LGF) plans a sequel to 2004's The Punisher for next year, and News Corp.'s (NYSE:NWS) 20th Century Fox has slated X-Men Origins: Wolverine for May of 2009.
  • Licensing also improved margins by reducing inventory and production costs for toys. Marvel shed its toy business in 2006 in favor of a deal with Hasbro (NYSE:HAS).

For the most part, CAPS investors like what they see. They give the stock four out of five stars. What's your take? Click here and let us know.

(Figures are in thousands, except per-share data.)

Income Statement Highlights

Q3 2007

Q3 2006

Change

Sales

$123,642

$92,161

34.2%

Net Profit

$36,268

$13,200

174.8%

EPS

$0.45

$0.16

181.3%

Diluted Shares

 80,521

 84,854

(5.1%)

Get back to basics with a look at the income statement.

Margin Checkup

Q3 2007

Q3 2006

Change*

Gross Margin

85.82%

67.79%

18.03

Operating Margin

53.14%

29.98%

23.16

Net Margin

29.33%

14.32%

15.01

* Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q3 2007

Q3 2006

Change

Cash + ST Invest.*

$45,611

$42,307

7.8%

Accounts Rec.

$37,708

$71,235

(47.1%)

Inventory

$10,076

$11,874

(15.1%)

Liabilities

Q3 2007

Q3 2006

Change

Accounts Payable

$1,934

$9,114

(78.8%)

Non-Film Debt

$0

$79,700

(100.0%)

*Includes restricted cash.

The balance sheet reflects the company's health.

Cash Flow Highlights

YTD 2007

YTD 2006

Change

Cash From Ops.

$16,298

$116,513

(86.0%)

Capital Expenditures

$2,372

$14,466

(83.6%)

Free Cash Flow

$13,926

$102,047

(86.4%)

Free cash flow is a Fool's best friend.

Related Foolishness:

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussions on what the numbers mean.

Fool contributor Tim Beyers held a position in the shares and LEAP options of Marvel at the time of publication. Find Tim's portfolio here, and his latest blog commentary here. The Motley Fool's disclosure policy is also a marvel.