Macroaxis Stories

How much will Build A owe in December?

November 24, 2024  By Rifka Kats
Macroaxis Story
Build-A-Bear Workshop carries $83.57 million in debt, with a debt-to-equity ratio of 1.0, which is reasonable for its industry. The company's current ratio stands at 1.28, indicating it might face challenges meeting its short-term financial obligations. However, leveraging debt can still be a smart strategy for Build-A-Bear if it leads to high-return growth opportunities.

Key Points

Considering a leveraged investment in Build-A-Bear Workshop (NYSE: BBW) could be intriguing, especially with its total revenue reaching 486.1M and a forward dividend yield of 0.02. However, potential investors should weigh the Sortino Ratio of 0.16, which suggests a moderate risk-adjusted return, before making a decision.
Published few days ago
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Reviewed by Vlad Skutelnik

Sometimes, the bear market can be your best friend. As we look at Build-A-Bear Workshop, the numbers paint an intriguing picture. With a net income of 52.8M and retained earnings standing at 75.3M, the company seems to be in a solid financial position. Despite having non-current liabilities totaling 58.9M, the specialty retailer has managed to maintain a strong EBITDA of 79.8M, suggesting robust operational efficiency. Analysts are optimistic, with a consensus rating of strong buy and a highest estimated target price of 44.03, indicating potential upside from its current typical price of 37.81. However, the market's unpredictability means that while December could bring a surge, investors should keep an eye on broader economic indicators and consumer spending trends that could impact this domestic retail giant. Build-A-Bear is set to release its earnings report tomorrow. Currently, the company's income quality remains steady compared to last year. Looking ahead to 2024, the ratio of enterprise value to operating cash flow is expected to rise to 11.23, while the enterprise value itself might slightly exceed $179.8 million. While some bold investors are diving into the specialty retail sector, Build-A-Bear Workshop might not necessarily be at the top of your list.
Build A financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Build A, including all of Build A's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Build A assets, the company is considered highly leveraged. Understanding the composition and structure of overall Build A debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Build Total Liabilities

Build A Bear liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Build A Bear has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Build A balance sheet include debt obligations and money owed to different Build A vendors, workers, and loan providers. Below is the chart of Build short long-term liabilities accounts currently reported on its balance sheet.
You can use Build A Bear Workshop financial leverage analysis tool to get a better grip on understanding its financial position

How important is Build A's Liquidity

Build A financial leverage refers to using borrowed capital as a funding source to finance Build A Bear Workshop ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Build A financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Build A's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Build A's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Build A's total debt and its cash.

Build A Gross Profit

Build A Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Build A previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Build A Gross Profit growth over the last 10 years. Please check Build A's gross profit and other fundamental indicators for more details.

Breaking down Build A Further

Build A Bear reported the last year's revenue of 486.11 M. Total Income to common stockholders was 52.8 M with profit before taxes, overhead, and interest of 245.87 M.

Liabilities Breakdown

90.8 M
Total Current Liabilities
46.7 M
Non Current Liabilities Total
Liabilities And Stockholders Equity248.59 Million
Total Current Liabilities90.81 Million
Non Current Liabilities Total46.67 Million
Non Current Liabilities Other1.24 Million
Warren Buffett once said, "Price is what you pay.
Value is what you get." As we look at Build-A-Bear Workshop (NYSE: BBW), this sentiment rings true. With a current ratio of 1.31X, the company demonstrates a solid ability to cover its short-term liabilities, which stand at 83.7 million. Despite a beta of 1.52 indicating higher volatility, the specialty retailer's return on equity of 0.43 suggests efficient use of shareholder funds. As December approaches, investors might find value in BBW's potential upside of 5.24%, especially given its market capitalization of 516.24 million and a forward dividend yield of 2.09%..

Another 3 percent climb for Build A

Build-A-Bear Workshop's stock has recently climbed by 3%, with its mean deviation dropping to 2.31. This suggests the stock's price movements are becoming more predictable, potentially appealing to investors who prefer stability. As this trend unfolds, there's a chance for a more consistent rise in the stock's value, making it an attractive option for those seeking steady growth. As of November 24th, the stock shows a downside deviation of 2.4, a risk-adjusted performance of 0.1305, and a mean deviation of 2.31.
Technical analysis can help investors use historical prices and volume patterns to anticipate future price directions. To ensure the stock is accurately priced at $38.19 per share, consider examining its information ratio, potential upside, and kurtosis. Additionally, with a Jensen alpha of 0.3344, it's advisable to review Build-A-Bear's current market performance to confirm its sustainability.Considering the current dynamics surrounding Build-A-Bear Workshop's stock, it's clear that there is a strong bullish sentiment among analysts, with a consensus rating of "Strong Buy." The stock's potential upside price is pegged at 41.28, and the highest estimated target price reaches 44.03, suggesting room for growth. However, investors should remain vigilant, as market conditions can shift rapidly, especially during the holiday season when consumer spending patterns can be unpredictable. With 3 analysts recommending a strong buy, Build-A-Bear presents an intriguing opportunity, but it's essential to balance optimism with caution, keeping an eye on broader economic indicators and retail trends as December unfolds..

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Editorial Staff

Rifka Kats is a Member of Macroaxis Editorial Board. Rifka writes about retail product and service companies from the perspective of a regular consumer and sophisticated investor at the same time. She is passionate about corporate ethics and equality in the workforce. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of Build A Bear Workshop. Please refer to our Terms of Use for any information regarding our disclosure principles.

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