1 Ridiculously Undervalued Growth Stock Down 10 Percent to Buy Hand Over Fist

Here’s why I think Spin Master (TSX:TOY) is a top undervalued growth stock investors should pay attention to right now.

| More on:
A person builds a rock tower on a beach.

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Spin Master (TSX:TOY) is a global player in the toy and entertainment industry. The company has become famous for its innovation and diverse portfolio of brands, such as PAW Patrol, Hatchimals, and Rubik’s Cube. Despite recent 10% losses in its stock, this company remains an undervalued growth stock in my books and is one that currently holds significant upside potential. 

Created with Highcharts 11.4.3Spin Master PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

A fundamentally attractive company with a very strong growth story is an under-priced TSX growth stock opportunity in Spin Master. Learn why this stock is still a buy in 2024.

Why is Spin Master undervalued?

Spin Master is trading at an attractive valuation due to broader market trends impacting growth stocks and investor concerns regarding consumer spending. The result is that increasing pressure has materialized for such companies in the consumer discretionary sector.

Despite these factors, Spin Master has managed to keep headwinds against supply chain disruptions, rising inflation, and concerns over future consumer spending. Therefore, it has also witnessed overcorrection, which gives an entry point for long-term investors. 

Strong brand portfolio

One reason Spin Master remains a cogent growth stock is its bargain brand portfolio and promising innovation. The company has been consistently offering a strong and relevant bouquet of toys and games that resonate with children and families globally. Flagship brands such as PAW Patrol have become household names, with existing demand strengthened by licensing deals.

With its focus on product innovation and strong expertise in launching new brands, Spin Master is well-positioned to face off with competition from all ends within the toy market segment. The company has done a great job of vertically integrating digital gaming with traditional toys to enable itself to venture into different markets and create further room for growth. 

Impressive revenue growth

Spin Master has generally shown solid resilience in its financial performance, even amid pandemic upheavals and economic uncertainties. The company reported strong revenue growth, fueled on one hand by rigid toys and on the other hand by its digital gaming segment. 

Notably, Spin Master has a clean balance sheet, with nominal debt representing the flexibility to support targeted investments and acquisitions to engage in future growth. The cash-generation ability is also sound enough to embrace product development with marketing operations along with exploring new heights in digital gaming and entertainment. 

What makes Spin Master a buy in 2024?

Spin Master’s deep distribution channels and robust results in North America serve as a license for further expansion worldwide. In addition, it expands particularly into fast-developing markets in Asia, where quality toys and children’s entertainment content are in substantial demand. The added geographic diversity further supports the company’s growth and does away with the business risks of sole dependence on any one market.

The ongoing digital transformation, alongside steady revenue from traditional toys, will strike a balance between growth paths. Spin Master is well-positioned to create multiple revenue streams, ranging from physical products to digital content and gaming. 

Moreover, Spin Master is uniquely competitive as it has always innovated or launched true cultural phenomenon brand products. Examples include PAW Patrol’s launch and continued popularity: a testimony to their expertise in creating long-lasting customer loyalty and relevance. 

Besides, Spin Master’s partnership with national retailers and media outlets gives it access to amplified audiences to showcase products. With every new step toward the digital gaming portfolio and entertainment offering, Spin Master should hopefully garner more attention. Hence, it results in a strong market position and competitive edge to tap into long-term growth. 

Should you invest $1,000 in Spin Master right now?

Before you buy stock in Spin Master, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Spin Master wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Spin Master. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

Start line on the highway
Stocks for Beginners

My Top 5 Canadian Stocks for Beginning Investors

A market correction is a good time for new investors to begin their investing journey. These five Canadian stocks can…

Read more »

nugget gold
Metals and Mining Stocks

2 Materials Stocks I’d Buy With $20,000 Whenever They Dip in Price

Teck Resources and Agnico-Eagle Mines offer quality materials stock exposure at a time when both companies are thriving.

Read more »

Asset Management
Stocks for Beginners

Top Canadian Stocks to Buy for Long-Term Gains

Canadian stocks really can offer it all, especially when looking at long-term growth in these few.

Read more »

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

A plant grows from coins.
Energy Stocks

2 Discounted Dividend Stocks With Significant Growth Potential

If you’re in search of income and capital appreciation in the long run, here are two discounted Canadian dividend stocks…

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

Senior uses a laptop computer
Energy Stocks

Here’s How Investors Can Turn $15,000 in a TFSA Into $235,000

Energy stocks aren't created equal, and this one might be one of the best of the batch.

Read more »