Why LeapFrog Enterprises (LF) Is Down Today

NEW YORK (TheStreet) -- LeapFrog Enterprises  (LF) was falling 9.8% to $6.35 on Thursday morning after the educational entertainment company issued guidance for the fiscal year 2014 that was less than analysts' expectations.

For the full year, LeapFrog expects profit between 18 and 25 cents on $554 million to $580 million in sales. Analysts surveyed by Thomson Reuters expected adjusted profit of 53 cents on $605 million in sales. For the fourth quarter 2013, the company reported a profit of $63.9 million, or 90 cents a share, up from $62.3 million, or 89 cents a share, in the same period one year earlier. Net sales fell 24% to $186.7 million. Analysts polled by Thomson Reuters expected $215 million in sales.

LeapFrog's board of directors also approved a repurchase program of up to $30 million through the end of the year.

"The holiday retail environment was very challenging," said CEO John Barbour in the company's statement. "As a result, we were unable to build on the 28% full-year net sales growth we achieved in 2012, and our net sales declined 5% for the year."

Must Read: Interesting LF Put and Call Options for September 20th

TheStreet Ratings team rates LEAPFROG ENTERPRISES INC as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LEAPFROG ENTERPRISES INC (LF) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LF's revenue growth has slightly outpaced the industry average of 0.2%. Since the same quarter one year prior, revenues slightly increased by 4.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LF has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, LF has a quick ratio of 2.44, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Leisure Equipment & Products industry and the overall market on the basis of return on equity, LEAPFROG ENTERPRISES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 39.49% is the gross profit margin for LEAPFROG ENTERPRISES INC which we consider to be strong. Regardless of LF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.12% trails the industry average.
  • You can view the full analysis from the report here: LF Ratings Report

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