Don’t look now, but shares of Canadian toymaker Spin Master (TSX:TOY) are up a whopping 12.7% on the back of some spectacular quarterly earnings results. The quarter really was that good, with revenue surging nearly 27% year over year, with prominent strength right across the board.
Undoubtedly, Spin Master stock probably shouldn’t have sagged the way it did in recent weeks. After the quarterly bounce, the stock now finds itself flirting with 52-week highs just shy of the $50-per-share mark. While the double-digit percentage point pop after earnings was remarkable, I still think the stock could be on the cusp of a sustained rally to much higher levels, as investors have more of a chance to truly digest the sensational results.
Could Spin Master stock eclipse its all-time high just below $60 this year? Count me as unsurprised if it did, given the incredible job of management thus far in turning a corner amid ongoing supply chain issues. At around 24.5 times trailing earnings, I think the name should appeal to growth and value investors alike. And after such a pop, momentum investors may also wish to give the name a second look.
Spin Master stock is hot, but is it too hot to handle, given recent quarterly strength? Probably not
I’m no fan of chasing stocks after such big upside moves. That said, I believe TOY stock deserves an exception. The stock was never expensive to begin with, and the firm is generating respectable amounts of free cash flow. With a strong balance sheet keeping the door open for M&A opportunities as they arise, I think Spin Master stock is a name that could soon become a household name.
Yes, management had their fair share of hiccups well before the pandemic started. After staying resilient through another pandemic-plagued quarter, though, I think the firm is finally ready to move on and pick up where it left off. If anything, the pandemic may be more of a positive for the firm, given the jolt to its digital games segment.
Gross product sales came in at US$627.5 million. Spin’s new top boss Max Rangel remarked on his team’s effective management through the difficult supply chain environment. Indeed, Rangel and his team really deserve a round of applause, given how widespread such COVID-induced supply-side challenges have become of late.
Moving forward, I’d look for Spin to continue firing on all cylinders. Digital games and new innovations could make Spin Master stock worth north of 30 times earnings. Indeed, real earnings are what investors want right now. And with Spin, that’s exactly what you’re getting. Alongside that, you’re getting a magnificent growth story fueled by strategic M&A and organic innovation.
The bottom line for Foolish investors
After such a dominant quarter, I think a move towards $60 is just a matter of time for TOY stock. The quarter was that good, and I’m a big believer in the name and its talented management team. As the pandemic goes endemic, look for Spin Master to continue building on its strengths.
