JAKKS Pacific, Inc. (JAKK) recently jumped to a new multi-year high at $19.96 after reporting a 15% Q3 earnings surprise in late October. With a compelling valuation and rising estimates, this Zacks #1 rank stock provides plenty of upward momentum for investors to play with.
Company Description
JAKKS Pacific, Inc. designs and sells toys and consumer products. The company was founded in 1995 and has a market cap of $528 million.
With the global economy rebounding from the crippling recession of 2008 and 2009, consumers are gaining more confidence spending on discretionary items like toys and entertainment. That dynamic showed up on Oct 26 when JAKKS reported strong Q3 results that came in ahead of expectations.
Third-Quarter Results
Although revenue was down slightly from last year to $349 million, earnings came in better than expected at $1.23, 15% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 91% over the last three quarters.
JAKKS did see its gross margin decline a bit during the quarter on increased shipping costs and labor shortages in Asia, but the company expects that short-term trend to reverse in 2011 on some higher-margin products hitting the market.
Strong Balance Sheet
The company’s balance sheet has also been on the upswing, with cash and equivalents up $65 million from last year to $219 million against a total debt load of $89 million. Share Buy Back
The strong cash balance enabled the Board of Directors to approve a $30 million share buy back.
Estimates
We saw some pretty solid movement in estimates on the good quarter, with the current year up 25 cents to $1.48, a bullish 43% growth projection from last year.
Valuation
Not only does JAKKS have momentum, it also has value, trading with a forward P/E of 13X, a nice discount to its peer average of 18.5X.
2-Year Chart
On the chart, shares have been rallying with the market since September, recently hitting a new multi-year high just shy of $20 on the good quarter. The stochastic below the chart is signaling that shares are trading safely away from over bought territory. Look for support from the trend line and short-term low on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
JAKKS PACIFIC (JAKK): Free Stock Analysis Report
Zacks Investment Research
