The market’s response to Funko (NASDAQ:FNKO) has been perplexing.
Sales were more than expected, and the fiscal year 2022 outlook is now looking better than ever. Even if the price of all those shares of the company has increased, they are still quite affordable for a company that is expanding quickly.
Therefore, despite the fact that the stock’s current decline is unpleasant, investors who have faith in the company’s future would be advised to think about using this as a purchasing opportunity.
Funko Finances Fantastic
The management team of Funko released financial data for the second quarter of the business’ 2022 fiscal year after the market closed on August 4th.
The data came in extremely good, on the whole. Consider the example of revenue. The quarter’s sales totaled $315.7 million. That’s an increase of 33.7% over the $236.1 million the business reported only one year prior. Funko’s results for the first half of the year are excellent because of the significant rise in revenue, which increased by 46.7 percent year over year to $624.1 million from $425.3 million in the first half of 2021.
Sales increased during the most recent quarter due to strength across the board. Revenue in the Core Collectible Brands category increased by 21.3 percent from $192.1 million to $233 million.
The category for the Loungefly Brand was even more spectacular. Here, revenue soared by 114.3%, rising from $32.7 million to almost $70 million. Additionally, the growth in sales for Other Brands was only 11.6 percent.
It’s also important to note that Funko’s direct-to-consumer sales increased by 26% year over year, suggesting that this area of the business should have a bright future. Additionally, it should be noted that the U.S. market witnessed particularly robust revenue growth, with sales increasing by 41.7% as opposed to 21.88% in Europe.
Profitability Picture Complex
The picture was a little complicated when it came to profitability. The most recent quarter’s net income was $14.7 million. Comparing that to the $13.8 million recorded for the second quarter of 2021, there is a very slight increase. Operating cash flow decreased from $33.9 million to $7.1 million, which is negative. But if we take into account changes in working capital, it would have dropped from $34.5 million to $34 million more subtly. Finally, the company’s EBITDA decreased from $41.1 million to $31.8 million.
Although some of these concerns with profitability may be challenging for investors to understand, management doesn’t appear concerned.
In actuality, Funko’s guidance has simply been raised. The company now anticipates sales of between $1.30 billion and $1.35 billion for the entire 2022 fiscal year.
The previously estimated range was between $1.275 billion and $1.325 billion, thus this is an increase. This results in an additional $25 million in sales at the midpoint. It also compares favorably to the $1.31 billion in sales that analysts had anticipated for the year and is between 26 and 31% greater than what the company produced in 2021.
Growth Supported
Management had a lot of intriguing developments to share to support growth.
For instance, the business is growing its collectible gaming portfolio with a new game called Disney Kingdomania that is based on some of the most well-known Disney (NYSE:DIS) and Pixar characters.
This is on the collecting gaming side of the equation. Management acknowledged that market players were showing a great deal of enthusiasm for Digital Pop! NFT company. In contrast, the Scooby-Doo and My Little Pony drops both sold out in less than 30 minutes. For instance, their DC Comics NFT sale attracted approximately 0.5 million fans in line.
In terms of profitability, the company currently anticipates EBITDA of $193.45 million. Based on midpoint guidance, this. Prior forecasting called for $189.8 million. The same method would result in an adjusted net income of about $104.55 million.
That compares well to the $101.2 million management had initially projected. When it comes to operating cash flow, no recommendations were made. The adjusted version of this, however, should read $126.3 million if we assume that it will change at the same rate as EBITDA.
Shares of the company now appear to be slightly more affordable than they were previously, mostly as a result of the rise in outlook.
The company is currently selling at a price-to-earnings multiple of 12.4, based on projections for 2022. This is a decrease from the reading of 29.6 that we obtain using results from 2021. The multiple of price to adjusted operating cash flow is currently 10.1. That contrasts with the 13 readings we would obtain using our 2021 figures. And using 2021 projections, the EV to EBITDA multiple should fall from 10 to 7.8 this year.
On an absolute basis, shares appear to be undervalued and are priced similarly to comparable companies.
Featured Image: Megapixl @Us40637
