Before Christmas, This Toy Stock Has All the Bells and Whistles You Need

Here’s why Spin Master (TSX:TOY) remains a top undervalued growth stock long-term investors may want to consider at current levels.

Chris MacDonald

Chris MacDonald has had a love for finance his whole life, ultimately leading him to pursue an MBA in finance. He's worked as a financial analyst for a number of companies in the corporate finance and venture capital space during his 10-year investing career. He endeavors to follow in the footsteps of iconic investors like Warren Buffett in building a long-term defensive portfolio.

Published December 25, 2023 11:00 am EST

Are you looking for a chance to invest that longstanding money in your account to focus on capital growth before 2023 ends?

As the Christmas season sets in, Spin Master (TSX: TOY) brings forth great opportunities for investors to make the best use of their saved cash.

Keep reading to know the factors that make Spin Master’s TOY a worthy investment option for 2023.

Spin Master shares appear undervalued

I recently read an intriguing analyst piece, suggesting that the projected fair value of Spin Master Corp. TOY is $52.45/share. Based on its current share price of less than $34 per share, that would imply upside of more than 35%, and suggest this stock is significantly undervalued.

My discounted cash flow model shows similar numbers, which is why I found this report so prescient. The company’s cash flow growth and return on investment figures suggest that, assuming the company’s long-term growth rate remains relatively robust, Spin Master’s stock price could have much more room to run from here as a value play.

Strong third-quarter results highlight bullish outlook

Spin Master’s recent Q3 results, published in November, showcased a growth company that continues to deliver strong performance in its top- and bottom-line numbers across its three creative centres. The company’s report highlighted a 71.4% increase in revenue in entertainment, 30.9% in digital games, and 8.9% in toy segments in Q3 FY2023–24.

Along with new launches in the field of digital games, the company also declared the acquisition of Melissa and Doug in this quarter. This happens to be Spin Master Corp’s largest acquisition to date.

Macro pressure on the toy industry is likely to increase in Q4, as a significant slowdown is expected by some analysts. However, other experts believe this economic pressure to decrease as the Christmas season draws near.

Spin Master remains an undervalued growth stock worth considering

If analyst models are correct and Spin Master does have the kind of upside expected, this is a stock to buy now. Heading into what could be a volatile holiday shopping season, I expect TOY stock to be volatile. However, for those with a stomach for volatility, it’s also a name worth considering as part of a well-balanced portfolio.