Investment Thesis
Build-A-Bear demonstrates strong profitability fundamentals with 63.8% gross margins and 14.6% net margins, coupled with a debt-free balance sheet. However, net income growth of only 0.8% YoY despite 6.7% revenue growth signals operational headwinds and margin compression, indicating a mature business facing cost pressures without commensurate pricing power.
Strengths
- Excellent profitability margins (gross 63.8%, operating 19.1%, net 14.6%) indicating strong unit economics
- Debt-free capital structure (D/E 0.00x) providing financial flexibility and resilience
- Consistent positive free cash flow generation ($14.4M FCF, 11.5% FCF margin) supporting sustainability
Risks
- Deteriorating growth quality: revenue growing 6.7% while net income grows only 0.8%, suggesting margin compression
- Quick ratio of 0.72x indicates potential working capital constraints; retail inventory-heavy model vulnerable to demand shocks
- Exposure to cyclical consumer spending and secular retail headwinds in toy/game retail sector with e-commerce competition
Key Metrics to Watch
- Operating margin trend—critical to monitor for continued cost inflation relative to revenue growth
- Free cash flow sustainability and conversion to net income—identifies margin recovery or deterioration
- Inventory-to-revenue ratio—gauges operational efficiency and working capital management in retail model
Financial Metrics
Revenue
125.3M
Net Income
18.3M
EPS (Diluted)
$1.45
Free Cash Flow
14.4M
Total Assets
354.1M
Cash
26.2M
Profitability Ratios
Gross Margin
63.8%
Operating Margin
19.1%
Net Margin
14.6%
ROE
11.5%
ROA
5.2%
FCF Margin
11.5%
Balance Sheet & Liquidity
Current Ratio
1.53x
Quick Ratio
0.72x
Debt/Equity
0.00x
Debt/Assets
0.0%
Interest Coverage
N/A
Long-term Debt
N/A
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-06-12T07:25:33.029357 |
Data as of: 2026-05-02 |
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