Build-A-Bear Workshop Inc. Stock Downgraded (BBW)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model

NEW YORK ( TheStreet) -- Build-A-Bear Workshop (NYSE: BBW) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has decreased by 13.1% when compared to the same quarter one year ago, dropping from -$6.68 million to -$7.55 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, BUILD-A-BEAR WORKSHOP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BBW has underperformed the S&P 500 Index, declining 8.67% 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.
  • BUILD-A-BEAR WORKSHOP INC's earnings per share declined by 24.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BUILD-A-BEAR WORKSHOP INC swung to a loss, reporting -$1.00 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.03 versus -$1.00).
  • BBW, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

Build-A-Bear Workshop, Inc. operates as a specialty retailer of plush animals and related products. The company's merchandise comprises various styles of animals to be stuffed; clothing, shoes, and accessories for the stuffed animals; and other brand appropriate toy and accessory items. Build-A-Bear Workshop has a market cap of $76.5 million and is part of the services sector and specialty retail industry. Shares are down 47.9% year to date as of the close of trading on Tuesday.

You can view the full Build-A-Bear Workshop Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff
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