Looking at Leap Frog as a turnaround investment opportunity. Like few things about the company and trending events associated with the name.
1. Trading at all time low, kind of binary path forward, doesnt do well and goes bankrupt or trades higher from all time lows.
2. Strong brand name with educational and entertainment associations in the minds of the parents.
3. New CEO has made some positive comments and action plans in the press recently.
4. Tackling low hanging fruits like focused communication and better packaging similar to what Starbucks did when Founder came back as CEO.
5. New product dedicated mobile tablet kind of device for kids on track for launch.
6. ~$1.2 in cash per share
7. Doesnt have any short term debt commitments enabling management to focus on business decisions.
8. Cash flow positive in the last quarter, working capital changes mostly based on Inventory which might be a risk if it doesnt sell through.
9. Trading at multiples below peers.
10. turned profitable in FY10 after 4 yrs of losses. so good momentum for now.
11. effective cost management for Q1. SG&A and R&D are both down and so is advertising, though ad spend is expected to catch up in the year.
Near term Catalyst: Launch of new product in Q3.
Estimate price: $6 and up
