JAKKS Pacific Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of toy maker JAKKS Pacific (NAS: JAKK) were getting disassembled by investors today, falling as much as 22% in intraday trading after the company lowered its full-year guidance.

So what: There are few better ways to get a stock to sell off than when a management team tells investors that earnings will be drastically lower than what they expected. Right after yesterday's market close, the press release from JAKKS was ominous, a lament that "the sales performance of its products has been disappointing."

For 2011, the company now sees earnings per share coming in between $0.37 and $0.40, down from previous guidance of $1.32-$1.35.

Now what: With such a drastic sell-off in the wake of the announcement, there's the possibility that investors are overreacting. However, given the chasm between what the company delivered versus what it had told investors that it would deliver, before jumping in I'd want to dig further to figure out whether there is a reasonable explanation for management to have been so off. For this Fool, at least, a key component in a good investment is a management team that tells investors what it's going to do and then delivers on those promises.

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At the time thisarticle was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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