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Why JAKKS Pacific (JAKK) Stock Is Up Today

Tickers in this article: GEK JAKK

NEW YORK (TheStreet) -- JAKKS Pacific shares are up 8.1% to $8.14 in trading on Friday.

JAKKS Pacific was upgraded to "outperform" from "market perform"  by analysts at BMO Capital Markets. The firm raised their price target on the shares to $10 from $8.

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The multi-brand toy manufacturer recently closed on a $75 million credit facility with General Electric Capital Corporation  . CEO Stephen Berman expects the credit facility to allow the company increased flexibility.

"We continue to implement our strategy of product innovation and international growth, combined with a tight rein on operating costs. With the traction of our turnaround and product flow coming out of 2013 and heading into 2014, the credit facility commitment will provide financial flexibility to our capital structure," said Berman.


Separately, TheStreet Ratings team rates JAKKS PACIFIC INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate JAKKS PACIFIC INC (JAKK) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for JAKKS PACIFIC INC is currently lower than what is desirable, coming in at 29.46%. Regardless of JAKK's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, JAKK's net profit margin of -11.66% significantly underperformed when compared to the industry average.
  • JAKK's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.17%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Leisure Equipment & Products industry and the overall market, JAKKS PACIFIC INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • JAKK's debt-to-equity ratio of 0.93 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.31 is sturdy.
  • JAKKS PACIFIC INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, JAKKS PACIFIC INC continued to lose money by earning -$3.02 versus -$4.96 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$3.02).
  • You can view the full analysis from the report here: JAKK Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.