Toymaker JAKKS Pacific
What analysts say:
- Buy, sell, or waffle? With nine analysts covering JAKKS (yeah, we think they just want to play with the toys, too), four say buy and five say hold.
- Revenues. Sales are expected to rise 10.8% to $137.5 million, which is in line with the estimates they have for the toymaker over the next five years as well.
- Earnings. JAKKS has a knack for beating analyst predictions for earnings, and handily too, but that could partly explain why they forecast profits to grow more than 58% in the quarter.
What management says:
With Mattel
Hasbro had a very good quarter and saw its Transformers toys continue to perform well, while Mattel disappointed with a surprising loss as Barbie maintained flat sales, Fisher-Price sales plunged. Luckily, the success of High School Musical showed some strength for the company.
I think the trend we're seeing suggests that the movie tie-ins are a big theme for driving toy sales related to them. This should bode well for JAKKS, which has been enjoying the incredible popularity of Hannah Montana and Miley Cyrus. With management noting that Wal-Mart
What management does:
While the lawsuit with World Wrestling Entertainment
12/06 |
03/07 |
06/07 |
09/07 |
12/07 |
|
---|---|---|---|---|---|
Gross |
38.5% |
37.9% |
37.1% |
37.4% |
37.8% |
Operating |
12.1% |
11.9% |
11.5% |
12.1% |
12.5% |
Net |
9.5% |
9.4% |
9.1% |
9.7% |
10.4% |
One Fool says:
At just 9.3 times 2009 earnings, JAKKS is very cheap. Even with its shares off more than 8% in trading so far today, Mattel is still valued at more than 11 times forward earnings, while Hasbro pushes almost 16 times. As the two biggest players in the space, it's natural they would be given a premium to play, but two other troubled toymakers -- RC2
RC2 hasn't yet recovered from its recall mess last year, and costs weighed it down at Christmas. It will be reporting earnings this week as well, so we'll see whether the turnaround is beginning to take hold. Selling at just under 9 times next year's earnings, JAKKS is being seen in the same light even though its prospects look better. Similarly, LeapFrog is valued at 19 times earnings even though it's still reporting losses, albeit narrower ones.
I'm expecting to see JAKKS jack the street once again and think its stock is undervalued at these levels. If it realized only modest P/E expansion to say that of Mattel, its shares would be valued at around $34 a stub. And over longer time frames, I see this toy maven enjoying bigger growth opportunities.
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