Heelys, Inc. (HLYS)

basedonfacts (< 20) Submitted: 8/22/07 9:58 AM : Start Price: $9.46 HLYS Score: -21.90

Here is the worst case for Heelys: it's a fad, kids get bored of the wheels, they take them out and they still have excellent shoes with the coolest brand in town for kids 6 to 14.

At a price of 9.50$, with 4.00$ in cash, receivables and inventory, Heelys is currently valued at about 5.50$ for future profits, with 1.25$ coming in 2007, the downside is pretty limited.

So fad or not, at the end of the days, its shoes, its a footwear company. The company has develop one of the strongest brand with kids, and thats worth something, might not be worth 40$ but definitely more than 5$.

Most footwear retailers have had hard time lately but one day or another kids will need shoes again. Inventory will get in line with demand and the stock price will get in line with its value. And as per the retailers, Heelys is still one the biggest seller.

So we could debate if kids in the US and the UK are different than other kids of this planet. But what I can see is that kids that have Heelys love them because they are fun (and the fun has survived the first pair of Heelys in many cases), not because its cool to have them, and that means a lot on the lifespan of a product.

I would never have bought this company before but at such prices there is great upside potential for very limited downside risk.

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