This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

LeapFrogging in the Wrong Direction, for Now

Stocks in this article: LF

NEW YORK (TheStreet) -- Technology-based learning company LeapFrog (LF) lived up to its name yesterday and took a leap. Unfortunately for shareholders, it was a leap in the wrong direction.

In an early January column, I reported the company's re-emergence on one of my deep-value stock screens. The stock had recently pulled back, as the company reduced expectations for its fourth-quarter earnings release.

On Wednesday, after the market closed, the company announced those results. The markets slapped LeapFrog with a 9% haircut that drove shares to a two-year low.

The fourth quarter was much worse than expected, with revenue falling to $186.7 million, down almost 24% from the same quarter a year earlier. More importantly, the result was also well below the $216 million consensus estimate. Earnings per share, without a $63.6 million tax benefit, were break-even, well below the 14 cent consensus estimate.

LeapFrog management blamed the results on the shortened holiday shopping season, discounting by retailers and the inability to keep key products in stock. It appears as though management's previous warnings were a bit too optimistic.

The other dose of bad news was the resulting increase in inventory and lowered guidance for 2014. The company now expects revenue for the year to be in the $554 million to $580 million range and earnings in the range of 18 to 25 cents per share.

As disappointed as the markets were with these results, there are still some positives. Especially in light of the depressed stock price, I think the position in LeapFrog I established late yesterday is warranted. The company ended the quarter with $168 million, or about $2.40 per share, in cash and no debt.

Despite a $14 million increase in inventories since the fourth quarter of 2012, the company's balance sheet is actually stronger. Shares now trade at just 1.09 time tangible book value per share.

Leave it to a deep-value investor to buy when most others are selling.

LF Chart
LF
data by YCharts

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs