Leapfrog enterprises inc
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Leapfrog Enterprises Inc. November 14, 2013 Yi Liu, Ye Liang, Charalampos Ntantanis, Caleb Pierson. Agenda. Company Background Current Position Macroeconomic Outlook Industry Overview Financial Analysis Valuation Recommendation. Current Position.

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Leapfrog enterprises inc

Leapfrog Enterprises Inc.

November 14, 2013

Yi Liu, Ye Liang, Charalampos Ntantanis, Caleb Pierson


Agenda

Agenda

  • Company Background

  • Current Position

  • Macroeconomic Outlook

  • Industry Overview

  • Financial Analysis

  • Valuation

  • Recommendation


Current position

Current Position

  • RCMP recommended for purchase 2000 shares @ market (8.20) which resulted in buying 2000 shares @ $8.19 on April 5, 2013

  • Current Stock price is $8.13

  • This is an unrealized loss of 0.73%


Macroeconomic outlook

Macroeconomic Outlook

  • World (and U.S.) population is growing across the toy consumer age range

  • Dollars spent on toys increased 7.68% from 2007 to 2012

  • Youth electronics decreased slightly from 2011 to 2012

  • Nostalgic/Retro toys are making a big push this year

  • The Consumer Sentiment Index is at the lowest point since 2011

Bloomberg News and Toy Industry Association Inc.


Industry overview

Industry Overview

  • The U.S. Toy market was worth $22 billion in 2012

  • Industry products include dolls/action figures, models, construction kits, scooters, board games, game consoles

  • Small companies are able to compete alongside larger businesses by focusing on niche products and by reacting more quickly to new trends

Source: Hoovers


5 forces for toys and games

5 Forces for Toys and Games

Source: Marketline


5 forces analysis

5 Forces Analysis

Source: Marketline


Company overview

Company Overview

  • Leapfrog trades on the NYSE with ticker symbol LF

  • Company was founded in 1995 by Michael Wood and Robert Lally and headquartered in Emeryville, California USA

  • Focus: Educational Entertainment for Children

  • Employees: 552 people on a full-time basis

Source: Company Website and 2012 10k


Business segments and operations

Business Segments and Operations

  • United States: 73%, 75%, 80% in 2012, 2011and 2010

  • Three large retailers: Wal-Mart Stores, Inc. Toys “R” Us, Inc. and Target Corporation

  • International

  • United Kingdom, France, Canada, Mexico, Australia, South Africa and Spain.

Source: 2012 10k


Product portfolio

Product Portfolio

Source: Company Website


Product portfolio1

Product Portfolio

  • Currently sell 2 versions of LeapPad, 2 hand held computers (GS and the Explorer), 2 sets of eBooks (Tag and the Tag junior), learning toys, and iPhone and iPad apps

  • LeapPads -- $120

  • GS and Explorer -- $70

  • eBooks -- $25 to $170 bundles

  • Toys -- $10 to $25

  • Apps -- $0.99

Source: Company Website


Risk factors

Risk Factors

  • Highly seasonal – Approximately 75% of total sales to retailers to occur during the third and fourth quarters.

  • Growing strategic focus on online products and services – Depends on consumer acceptance

  • Rely on a limited number of manufactures

  • Liquidity maybe insufficient to meet the long-term or periodic needs


Seasonality

Seasonality

Source: 2012 10k


Swot analysis

SWOT analysis


Management outlook

Management Outlook

  • A number of changes to executive management team during 2012 and 2011

  • Anticipate continued business growth at a pace ahead of the market with net sales expected to increase at high single –digit percentage growth rate

  • Plan to make long-term investments in content, international expansion, online communities, systems and new platforms


Major shareholders

Major Shareholders

Source: Yahoo finance


Major shareholders1

Major Shareholders

  • Well known financial institutions

Source: Yahoo finance


Key people

Key People

  • Mr. John Barbour, Chief Executive Officer, Director and Member of Non-executive Officer Stock Award Committee

  • Raymond L. Arthur, Chief Financial Officer

  • Gregory B. Ahearn, Chief Marketing Officer and Executive Vice President

Source: Businessweek


Recent financial information

Recent Financial Information

Source: Capital IQ


Recent financial information1

Recent Financial Information

Source: Capital IQ


Financial analysis

Financial Analysis


Financial analysis1

Financial Analysis


Financial analysis2

Financial Analysis


Recent stock performance

Recent Stock Performance

Source: Capital IQ, Yahoo Finance


Valuation wacc

Valuation — WACC

Source: Yahoo Finance, Bloomberg


Valuation dcf

Valuation — DCF


Valuation comps

Valuation — Comps.

Source: Capital IQ


Comps stock chart

Comps. Stock Chart

Source: Yahoo Finance


Decision drivers

Decision Drivers

  • Strengths

    • Climbing Revenues

    • Strong Cash Position

    • Highly specialized

    • DCF ($8.57)

  • Concerns

    • Raising competition from big players

    • Seasonal fluctuations


Recommendation

Recommendation

Hold


Leapfrog enterprises inc

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