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Here's Why I Am Staying Away From Build-A-Bear Workshop

William Bias profile picture
William Bias


  • Build-A-Bear Workshop provides customers with a way to customize their own product.
  • Build-A-Bear represents a company that sells a product that people shy away from during difficult times.
  • Build-A-Bear sports relatively heavy inside ownership.

It's important for long-term investors to develop a guide for doing their investment research. Over the years I have developed questions to guide me in my thinking when researching the publicly traded universe. Today's let talk about Build-A-Bear Workshop (NYSE: NYSE:BBW).

1.) What does the company do?

When you buy shares in a company you effectively become part owner of that company. Therefore, it's important for an investor to understand what a company sells. Build-A-Bear operates an interesting business, customized assembly of stuffed animals. This certainly represents an interesting way to engage the consumer and provide a unique experience. Customers can come in and build their very own stuffed animal.

2.) What do the fundamentals look like?

However, just because a company provides an interesting product and experience, that doesn't necessarily translate into expanding fundamentals and superior returns for shareholders. Investors should also look for companies that grow revenue and free cash flow over the long-term, retaining some of that cash for reinvestment back into the business and for economic hard times. Excellent revenue and free cash flow growth serve as catalysts for superior long-term gains.

Over the past 10 years, Build-A-Bear only expanded its revenue 8%. Its net income declined 47%, while free cash flow increased a mere 9% vs. where it was a decade ago (see chart below). The reason behind these declines is simple. People don't spend money on luxury items, such as customized teddy bears during a recession. Consumers worry more about putting food on the table.

BBW Revenue (Annual) Chart

BBW Revenue (Annual) data by YCharts

On the plus side Build-A-Bear actually possesses an excellent balance sheet. In the most recent quarter, Build-A-Bear possessed $55 million in cash, which equated to a whopping 54% of stockholder's equity. I like to see companies possess cash amounting to 50% or greater of stockholder's equity. The company possesses no long-term

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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