Build-A-Bear (BBW) was a highflying retailer that hit its peak in the middle of last decade with a stock price that hit around $40 a share. Since then it has been all downhill for this broken retailer with the shares now with a $4 handle. However, it has become ridiculously cheap given that it is still generating annual EPS and cash flow, has strong recent insider buying and is selling way below book value. For patient investors, it is well worth a bet as a value and turnaround play.
"Build-A-Bear Workshop operates as a specialty retailer of plush animals and related products. The company's merchandise comprises various styles of animals to be stuffed; clothing, shoes, and accessories for the stuffed animals; and other brand appropriate toy and accessory items." (Business description from Yahoo Finance)
7 reasons BBW could be a great turnaround and value play at just $4 a share:
- A director has picked up over a $1mm in new shares over the last six weeks.
- The stock has a solid balance sheet with approximately 55% of its market cap in net cash.
- BBW is dirt cheap at 51% of book value and just four times operating cash flow.
- The median analyst price target on the stock is $9 a share (low:$5 a share, high:$11 a share)
- At these prices an investor is basically getting the company that is still generating positive cash flow and earnings for less than half the combination of the company's cash and real estate on the books.
- The company has strong initial results with its new partnerships with the Girl Scouts and McDonalds (MCD). The stock is priced at just 17% of annual revenues and its e-commerce sales are growing 9% a year.
- Its looks like the stock has technical support in the $4 to $5 range (See chart)