Source: Penny Stock Detectives
Will Management Shake-up Restore This Penny Stock to its Former Glory? The U.S. toy and game manufacturing industry includes about 700 companies, and has annual revenue of about $2.0 billion. While many will recognize the major players like Mattel, Inc. (NASDAQ/MAT) and Hasbro, Inc. (NASDAQ/HAS), there are a number of smaller companies that could find a way into your penny stock portfolio. For investors, the baby care industry might not sound as interesting as precious metals, but it is lucrative. The playing field is also small enough for niche penny stocks to make their mark. The global baby care product industry caters to around four million babies on a yearly basis, generating retail revenue of nearly $7.0 billion. And, it’s expected to experience strong annual growth. Between 2009 and 2015, annual growth is pegged at 20%. (Source: Packaged Facts press release, “U.S. Market for Babycare Supplies Forecast to Increase More Than $1 Billion by 2015, Finds Latest Packaged Facts Report,” June 29, 2010.) This translates into gains exceeding $1.0 billion, as the market approaches $9.0 billion by the end of 2015. Between 2005 and 2009, the industry experienced a $577-million increase. Through its subsidiaries, Kid Brands, Inc. (NYSE/KID) designs, imports, and markets infant and juvenile bedding and furniture, as well as related nursery accessories. It also sells infant-development toys and teething, feeding, and bath and baby care products. Toys “R” Us, Babies “R” Us, Target, and Wal-Mart account for about 60% of sales. Kid Brands’ principal subsidiaries include Sassy, Kids Line, LaJobi, and CoCaLo. Kid Brands has a market cap of $40.4 million, and an enterprise value of $87.0 million. The penny stock has a forward price-to-earnings ratio of 5.0, $1.1 million in cash, $47.7 million in debt, levered free cash flow of $33.8 million, and a book value of $4.12. On September 12, the penny stock announced a number of changes in management. The penny stock announced the appointment of Kerry Carr as Executive Vice-President and Chief Operating Officer. Prior to joining Kid Brands, Carr was a senior executive with Avon, and worked at AT&T and The Walt Disney Company.
The company announced the appointment of Renee Pepys Lowe as President of Kids Line, LLC and CoCaLo, Inc. Kid Brands also announced the resignation of David C. Sabin as President of Kids Line and CoCaLo. The management shake-up comes on the heels of disappointing second-quarter results. On August 14, Kid Brands announced that second-quarter revenue slipped eight percent year-over-year to $55.5 million. This decrease was primarily the result of sales declines of 25.5% at Kids Line and 37.9% at CoCaLo. Kid Brands reported second-quarter net income of $0.2 million, or $0.01 per diluted share, as compared to a net loss of $2.7 million, or $0.13 per diluted share, for the same prior-year period. Year-to-date revenue fell 7.9% to $110.7 million. This decrease was primarily the result of sales declines of 15.4% at Kids Line and 21.8% at CoCaLo, in each case primarily due to significantly lower sales volume at certain large customers. Net loss for the 2012 year-to-date period was $0.6 million, or $0.03 per diluted share, as compared to a net loss of $3.0 million, or $0.14 per diluted share, for the same period in 2011.
Chart courtesy of www.StockCharts.com Between January and July, 2012, Kid Brands traded in a steady downward pattern. Following disappointing second-quarter results in August, the company’s share price plummeted, hitting a two+-year low of $0.95. In the days after reporting a number of changes in management, Kid Brands’ share price rebounded, climbing 62% and hitting an intraday high of $1.85 on September 17. Over the following days, the company’s share price retracted on profit taking; finding tested support near $1.50. Since then, Kid Brands’ share price has been bullish, breaking above its previous resistance placed at $1.85. While the move to the upside has been modest, it’s important to keep in mind that the overall market is trending lower; meaning, Kid Brands’ stock could feel short-term market pressure. Going forward, any rise in the company’s share price on increased volume would be a bullish sign. While a change in management is an encouraging sign for Kid Brands, investors probably won’t see a big turnaround in the near term. As opposed to looking for short-term gains, Kid Brands is more of a long-term growth opportunity. We Told You So… On August 31, penny stock analyst Mitchell Clark noted that the NASDAQ Biotechnology Index was close to hitting its all-time record high, set in 2000 when the rest of the stock market peaked. The index has been bullish over the last two years, as countless biotechnology stocks experience solid upward momentum. Shortly before alerting you to Infinity Pharmaceuticals, Inc. (NASDAQ/INFI), the company hit a record 52-week high of $18.50 a share; a significant increase over the $6.00 per share it was trading for in mid-February. Despite the strong year-to-date growth, Mitchell believed Infinity still had great potential. He was right. On October 5, the company hit a new 52-week high of $27.29; for a shortterm gain of 52.3%.
Source: Penny Stock Detectives