Q: What are your views on Spin Master as a long-term investment? I've held it for a couple of years and it hasn't done much. It seems like they are a well run company and their recent acquisition strikes me as a good one. But will the stock deliver comparably solid long term returns or should I move on?
5i Research Answer:
TOY operates as a children’s entertainment company, and is now trading at a 10.8x times' Forward P/E (valuation is lowest in years, ranging from 10.7x to 22x). In the last two years, revenue growth was challenging given the health of consumer spending. The balance sheet is strong, with net cash of around $600M. The company has started to pay dividends and repurchase shares recently. Based on consensus estimates, sales are expected to recover next year, growth is expected to be more than 20% in FY2024. Given the historically low valuation, and the expected recovery, we think TOY has some room to run from here, we would keep TOY here.