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In addition to the PenTech sort-out, JAKK's receivables and payables trend over the last couple quarters almost certainly has a fair bit to do with the seasonality of their business. Given that they are in the big ramp up to Xmas, their numbers look a little funny. Marketable securities apear to be getting cashed in in order to turn PenTech around and to finance the stock buyback (1.5 million shares so far).

The big reason that the stock is undervalued (and one you won't see in the numbers) is that the Street perception is that management "mislead" the analysts prior to the earnings shortfall announcement. I personally do not share the feeling, and I believe that we have simply seen a normal hiccup in a fast-growing company that is getting toward the top of the small company crowd. I'm more than happy to be patient, especially when I think of things like the Harry Potter license they have for next year's Harry Potter movie.

BTW, the PenTech acquisition was done in part to smooth out the seasonality of JAKK's earnings. While JAKK lives and dies by the Xmas season, PenTech gets most of its earnings from the back to school shopping season. If JAKK actually manages to cash in on the scooter craze with its electric scooter, the company should show a very nice spring as well.

(disclosure: JAKK is my largest single position. Do your own due diligence!!!)
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