Since its November high, Spin Master Corp. (TSX:TOY) has declined more than 18% to below $31 per share. However, the shares are still in a long-term uptrend since the company began trading publicly in the summer of 2015.
The pullback is a great opportunity to get in on this high-growth company, whose innovations are awarded by growing sales and profits.
A diversified business
Spin Master is a leading global children’s entertainment company with a diverse portfolio across a variety of categories. The company earned gross revenue of US$878.4 million in the first nine months of 2016 and will be reporting its fourth-quarter and full-year results on March 13.
Spin Master earned 38% of its revenue from the Pre-School and Girls category, 26% from the Activities, Games & Puzzles and Fun Furniture category, 22% from Remote Control and Interactive Characters segment, 14% from the Boys Action and High-Tech Construction segment, and 1% from the Outdoor category.
Led successfully by founders
Spin Master was founded by Anton Rabie, Ronnen Harary, and Ben Varadi, who continue to lead the company. Rabie and Harary are the co-CEOs and Varadi is the chief creative officer and an executive vice president.
Although the company has had a short public history, it has shown strong growth and profitability so far. Its revenue growth was exceeded 33% year over year, and its return on equity was more than 34% (both ending in September 2016).
Winning awards
Some of Spin Master’s best-known award-winning brands include Zoomer™ Dino, Bakugan Battle Brawlers™, and Air Hogs®. Since 2005, Spin Master has received 82 TIA Toy of the Year nominations and won 18 times across different product categories.
In February, it won three prestigious U.K. 2017 Toy of the Year Awards, which were presented by the British Toy & Hobby Association and the Toy Retailers Association. Additionally, it had two runner-up awards.
Hatchimals won the Toy of the Year 2017 award and PAW Patrol won two awards: Licensed Toy of the Year and Preschool Toy of the Year.
Investor takeaway
At below $31 per share, Spin Master trades at a forward multiple of about 17.2, which is inexpensive for a growth company.
However, there were some complaints about Hatchimals bought during the holiday season which failed to hatch. The impact of that has yet to be seen in the upcoming financial report on March 13.
Investors looking for growth can consider buying a partial position for their long-term accounts before the report and buy more shares after seeing the impact of the Hatchimals incident.
