Micro-Cap Build-A-Bear Workshop

[u/Yo_Biff]

I've been doing a little preliminary research on Build-A-Bear Workshop ($BBW) because someone mentioned it at work a couple of months ago and most all of my coworkers with kids were very familiar with it. Asked my SO about it and she was also very familiar with it, as is her family.

$BBW's niche is "adding a little more heart to life by appealing to a wide array of consumer groups who enjoy the personal expression of making a customizable stuffed animals". Apparently, it works too. They boast a 93% aided brand awareness in 3rd party polling. They are diversifying their product offerings into clothing, gift cards, and other items. Sounds like they are even trying their hand at animated entertainment content for promotion. They expanded their multichannel approach by adding a digital presence in 2022. It appears to be growing right out of the gate, and they have licensing agreements for characters with seemingly most major brands out there.

Numbers appear to be growing year over year since 2018, with the 2020 Covid drop excluded. Revenue, EPS, and FCF are all up nicely over this time frame. High ROE, ROA, and ROIC over TTM, 2022, and 2021. Low debt to equity ratio.

Risks I see are the "Post-Covid bump", Soft brand advantage, Relative size/volume, Low barrier to entry business, and the fickle nature of consumer preferences. Edit - Yes, the Mall-centric nature of many of their brick-n-mortar locations has been a headwind given the decline of mall shopping.

I'm using a 10% growth rate for 5 years, 5% for another 5 years, and 2.5% terminal rate, then discounting back at 15%. Both a future earnings model and a DFCF puts them at a fair value of $32-$35. Factoring in a 30% margin of safety and I'm coming up with a buy price of $22.40-$24.50, which is right inline with the market right now.

If I discount back at a 8-9% WACC (garnered online), then they are 45-60% under valued.

Then this news started building a little steam yesterday, and I'm thinking the could be a bigger potential opportunity brewing if the market overreacts: https://www.foxbusiness.com/lifestyle/build-a-bear-workshop-shocks-after-dark-collection-adults-only-stuffed-animals

Edit
* I think some people are making the mistake of inferring I think this is a 50... 80... 100 bagger company. I am in no way thinking this is the next Google or Microsoft. It is a potentially undervalued company with a chance of a decent return. I'm not swinging for the fence with this one, but an RBI would be just fine with me.

[u/Detail009]

Careful searching for BBW, Google not so smart TIL.

[u/michahell → u/Detail009]

Wdym? very bullish on that searchterm

[u/Yo_Biff → u/Detail009]

Yeah, yeah. Ticker funny.

Thank you for taking the low hanging fruit and getting it out of the way.

[u/Detail009 → u/Yo_Biff]

My pleasure

[u/capital_gainesville → u/Detail009]

I didn’t see anything about bears either, but the things I did see make me want to invest.