Is Spin Master a Buy?

Shares of Spin Master Corp (TSX:TOY) are down more than 39% since the start of the year. The children’s entertainment company has been hit hard from the COVID-19 pandemic with retailers shutting down and Spin Master also running into supply chain problems in Asia.

The company released its first-quarter results of 2020 on May 6. Sales in Q1 were down 5% from the prior-year period and the danger is that the second quarter may be even worse as Q1 only went up until the end of March, which was still when the pandemic was in its early stages in North America.

It’s likely that Spin Master’s stock continues falling as the pandemic continues to weigh on the markets. But the lower the stock goes, the better of a buy it is. The stock is currently trading at around 1.1 times sales and 2.5 times its book value. Demand for children’s toys and cartoons will remain strong over the long term. And that’s why the stock is likely to rebound, regardless of how retailers are doing.

In 2019, the stock had no trouble staying above $30 a share and so if you can get the stock at $20 or less, there could be more than a 50% upside once things in the economy get back to normal.

With top brands like Hatchimals and PAW Patrol, Spin Master’s proven that it knows how to create products and cartoons kids from all over the world will love.

The stock may be down now, but investors shouldn’t count out Spin Master for long.