Build-A-Bear Workshop, Inc. (BBW)

XMFCramerica (91.73) Submitted: 8/24/06 1:44 AM : Start Price: $21.00 BBW Score: -63.67

The underlying business model here may be somewhat shaky. The key question is as follows: can a business reasonably build a moat around allowing kids (and adults?) to custom-build their own teddy bears? Or is this a temporary fad that gets lost in the ever-growing junkyard of childhood toys? My gut tells me it's possible. There's something inherently youthful about teddy bears that seems to span the test of time. And building your own teddy bear? hey, that's special... if you're 4... I hope...

If the answer is indeed yes, a quick snapshot of the financials looks very promising: 40% insider ownership; 20% return on equity; forward PE of 11; PEG of .7. The company is currently trading near the lowest point in its history. Two other times it bottomed out at $20 a share and then proceeded to spike up. Call me crazy here, but can I venture to say the markets are extremely reluctant to price this company below $20 a share?

If that's the case, we can be hopeful that Build-A-Bear can keep growing well beyond its current 250 stores - and build its moat - with minimal risk. Retail (correction, as per their website "interactive retail-entertainment" is risky, yes; but when you find a winner, well, shareholders are happy. Kids of the World: Start craving some custom-made teddy bears!

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