Shares of the unassuming Build-A-Bear Workshop have soared more than 2,200% in the past five years, nearly six times the performance of Tesla, 10 times Meta Platforms and even beating Nvidia's 1,606% increase. At long last, Build-A-Bear is the IBD Stock of the Day.
Build-A-Bear stock also has beaten bitcoin's 1,077% surge in the past five years.
While Nvidia, Meta and other stock market winners spend billions developing software and hardware, the secret to Build-A-Bear's success is a mix of fabric and stuffing. That, plus some imagination, is what goes into its custom-made teddy bears.
The company's stores are a nirvana for stuffed-animal lovers, offering kids and adults a way to make their own plush toys with their choices for clothing, accessories and even sounds.
Customers also can buy products licensed from popular franchises. For example, there's a Jurassic World T. rex Plush and a How to Train Your Dragon Giant Toothless Plush. Build-A-Bear also sells through its website.
Room For Growth
For the quarter ended May 3, the company added 15 locations, bringing its worldwide total to 604. The St. Louis, Mo.-based outfit plans to expand abroad, where its franchising revenue today is less than 1% of total revenue.
Of 14 stocks in IBD's leisure products industry group, Build-A-Bear has the highest Composite Rating, an 89 out of 99. According to IBD Stock Checkup, the stock also has the highest EPS Rating (96) in the group.
This past year, the stock has well outperformed its three-year sales growth rate of 4% and three-year EPS growth rate of 13%.
But if Build-A-Bear stock can sustain its market-leading gains, it won't be because of high growth. Analysts' consensus earnings estimates for the next three quarters are for an 8% increase, then declines of 18% and 11%, according to FactSet. Sales should remain muted, with analysts forecasting year-over-year growth of 2% to 4% the next four quarters.
Analysts Bullish On Build-A-Bear
Only a few analysts cover the company, and all have buy recommendations on the stock, with an average target price of 59.33. Shares currently trade around 52.
One of those analysts, Keegan Cox of D.A. Davidson, raised his price target to 60 from 50 after the company beat fiscal first-quarter expectations on May 29. He cited a solid performance, "the right tariff levers in place, and upside from the natural margin uplift with increased commercial and franchising sales."
In a note to clients, Cox added that the company's quarter saw strength in each segment along with gross margin expansion and fewer discounts. International partners continue to lead store growth.
Management maintained its revenue outlook, and CEO Sharon Price John said the company saw positive momentum continue into the second quarter.
The company, which uses foreign sources for materials, expects a hit of less than $10 million in the current fiscal year from tariffs. In a conference call with analysts, executives said tariffs won't affect most international stores. Also, the company has shifted sourcing from China to Vietnam. It also redirected China-sourced products to other international locations as well.
Build-A-Bear Stock Near Highs
The stock soared to an all-time high 55.56 after the company's most recent quarterly report. Shares have been consolidating, testing short-term support, and appear to be forming a cup base. An early entry lies at 53.67 from Tuesday's high.
The most recent base was a third-stage pattern, so the stock's long-term advance is getting a bit aged. That's a risk investors must consider.
Build-A-Bear stock has a 21-day average true range (ATR) of 4.82%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
