Every now and then, a Canadian stock goes on sale for no good reason. That’s exactly what’s happened with Spin Master (TSX:TOY). Known for its imaginative toy lines and increasingly influential digital gaming business, Spin Master has fallen about 25% from its recent high. But this dip doesn’t reflect weakness; it signals an opportunity.
You already know it
Spin Master has always been more than just toys. Yes, it’s behind global hits like PAW Patrol, Hatchimals, and Kinetic Sand. But it’s also branching into entertainment and mobile gaming. This blend of physical products and digital content gives it a unique edge in a market where trends move fast. Even with economic headwinds and shifting consumer habits, Spin Master continues to generate strong results.
In its most recent earnings release for the first quarter of 2025, the Canadian stock reported revenue of US$393.8 million, up 13.6% from the same period last year. This beat analysts’ expectations and showed broad strength across its business segments. Toys continued to be a reliable revenue stream, while digital gaming delivered significant growth. The Canadian stock’s digital game division, led by Toca Boca and Sago Mini, is gaining momentum. These apps are popular with young children and are generating growing subscription revenues, a recurring income stream that’s highly attractive to investors.
What also stands out is Spin Master’s gross margin, which reached 52.4%. That’s a healthy figure, especially in the consumer goods space, where rising input costs have put pressure on many competitors. Even more impressive, Spin Master ended the quarter with US$421 million in free cash flow over the trailing 12 months. That kind of cash gives the company flexibility to invest, return capital to shareholders, or weather any future economic turbulence.
Set up for more
Spin Master isn’t overleveraged, either. With a debt-to-equity ratio of 0.38, it has plenty of breathing room on the balance sheet. It also pays a dividend, which currently yields about 2.12%. That might not turn heads like some of the ultra-high yielders on the TSX, but the company’s payout ratio sits at just 32%. That leaves lots of room to grow the dividend over time, something long-term investors tend to appreciate.
From a valuation perspective, the market hasn’t caught up with the Canadian stock’s momentum. The stock trades around $23 as of writing, well below the average analyst price target of $33.55. That implies a potential upside of over 45%! Analysts remain upbeat, with several noting the company’s strong brand portfolio and growth potential in both traditional and digital markets.
Let’s not forget the entertainment side of the business, either. Spin Master continues to invest in animated content and intellectual property. PAW Patrol remains a global franchise, with the recent movie release drawing new viewers and boosting merchandise sales. By owning and producing its own content, Spin Master gets more control over branding and distribution and more of the financial upside.
So, what happened?
Why has the Canadian stock fallen, then? Like many consumer discretionary names, Spin Master has faced a tougher macro backdrop. Concerns about inflation, shifting consumer spending, and inventory levels across retailers have weighed on sentiment. But the fundamentals are holding strong. And that’s exactly when savvy investors start to pay attention.
The market often overreacts in the short term. A 37% decline in share price can scare people off, but long-term investors know it’s just noise, especially when the company’s core business is still performing. Spin Master continues to grow, expand its reach, and generate cash. That makes it a rare mix of value and growth in today’s market.
Bottom line
If you’re looking for a Canadian stock to buy and hold forever, Spin Master makes a solid case. It has recognizable global brands, a growing digital business, a healthy balance sheet, and a modest but growing dividend. And right now, you can pick it up at a discount.
Sometimes, the smartest move is the simplest one: buy a great business when the market’s looking the other way. Spin Master checks all the right boxes for long-term investors who want growth, income, and quality. You don’t need to catch the bottom. You just need to hold on for the ride.
