Interesting ComparisonNote that this review was provided before there was any reaction to today's NR. GLTA
Symbol(s): Spin Master Corp (TOY), Converge Technology Solutions Corp. (CTS) Date: Jul 20, 2022 6:06 AM Question: I have held TOY for many years and it has shown glimpses of promise but has never really fulfilled its potential. My return has been relatively flat over that time period. Part of my interest in TOY was the potential for it to be taken out, but the more I read about the company, the less convinced I am that the founders have any interest in exiting. Although it has held up better than the market during the past year, I am wondering if it would be a good time to take advantage of its relative strength and purchase one of the many good companies that have been "unfairly" punished and which might have greater upside than TOY over the next 3-5 years. One such stock I have been watching is CTS. Would you agree that a trade of TOY to CTS is likely to yield a better return over 3-5 years? Is there a better trade you would recommend? How likely is it that a large catalyst (ie a blockbuster toy or a takeover) is going to occur to propel TOY higher? On a scale of 1-10, 10 being most risky, how would you rate the risk level of TOY vs CTS? This is a difficult call. TOY is cheaper, larger, more stable, and it has a ton of cash. But CTS has far more growth potential, and even with 2023 estimates, EPS is expected to nearly double, vs barely any growth expected for TOY. We have also thought TOY might privatize one day. It doesn't issue shares and generates substantial free cash flow. Mgmt. has done a very good job after a bad stumble several years ago. We would not see a huge catalyst here, unless insiders just take a random bid that shows up. There are multi-voting shares so any deal needs to be friendly. Risk wise, we would give TOY a 2 and CTS a 7.5, so there is that consideration. We are not sure we would do a full swap here, and might do a 50/50 split. (5iResearch)