JAKKS said it plans to give the initial buyer of the senior notes a 30-day option to buy up to 11.25 million in principal amount of additional notes. The company plans to sue the proceeds of the offering to repurchase all or a part of the $30 million aggregate principal amount of its 4.5% convertible senior notes due in 2014. JAKKS will use up to $25 million of the proceeds to fund a stock repurchase transaction with the initial buyer.
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 some concerns, 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, weak operating cash flow, generally disappointing historical performance in the stock itself and generally high debt management risk."
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 29.87%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -19.76% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$11.05 million or 94.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.12 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, JAKK's quick ratio is somewhat strong at 1.25, demonstrating the ability to handle short-term liquidity needs.
- JAKK has underperformed the S&P 500 Index, declining 15.66% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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.
- You can view the full analysis from the report here: JAKK Ratings Report