Discretionary spending has fallen sharply in the wake of the pandemic economic turmoil. People reduce discretionary spending.Given the very discretionary nature of Spin masterof (TSX: TOY) Product offerings, some investors avoid this name.
But I think this stock has real potential to be an outperformer coming out of this pandemic.
Learn why Spin Master is currently in top turnaround play.
Soaring sales make investors bullish
The company recently recorded significant growth Digital game segment.. Revenue in this sector increased by more than 400% in the last quarter to a staggering $ 31.8 million. Key driver? The company’s Toca Life World app is a hit among users. Spin Master has the knack for finding trendy toys that are “in” every year. The ability for users to share their own videos playing this game is widespread. Therefore, the number of app downloads has skyrocketed, benefiting Spin Master shareholders.
Users can download this app for free, but Spin Master Corp. Makes money through in-app purchases and upgrades. In fact, the company believes that the increase in subscribers to Spin Master’s Sago Mini kids app is partly contributing to topline growth.
The company reported net income of $ 300,000 in the fourth quarter. This is a significant leap from the $ 17.2 million net loss of the previous year, which investors are paying attention to.
Investors remain optimistic about the future
Last year, the company closed 13 distribution centers on a cost-cutting mission. In addition, the company reduced inventory by 28%. Spin Master has done a great job of increasing cash flow by making capital allocation more efficient. This is reflected in the Spin Master results. The company announced that it generated $ 124 million worth of free cash flow in the last quarter and $ 230 million for the full year. Spin Master has also declared that it has the strongest net cash position in history with an efficient cost-cutting strategy.
Over the past year, consumers have allocated most of their savings to debt repayments. But I believe they are looking for other ways to spend their money out of the pandemic. Therefore, discretionary spending is expected to skyrocket.
Investors are confident that Spin Master will work, with significant sales improvements and effective cost-cutting strategies. I think the company is doing everything right and is in a good position to make a profit and grow from here. So it’s time for value investors to start rethinking this stock as top turnaround play.
Like this top turnaround play? Below are some growth stocks that may outperform performance.
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Stupid contributor Chris Macdonald There are no positions in any of the listed stocks. Motley Fool owns and recommends a stake in Spin Master.
Today’s Top Buy: Spin Master Corp.
https://www.fool.ca/2021/03/11/todays-top-buy-spin-master-corp/ Today’s Top Buy: Spin Master Corp.