Remember the Furby, Hasbro's (NYS: HAS) huge hit toy back in 1998? The Furby was a cuddly little robotic hair ball with its own language, Furbish, and one goal, to make your children beg for one until your resolve crumbled. Inevitably you found yourself waiting in a Kmart line just to get on a waiting list to order one for Christmas. A Furbish "I love you" really meant "buy me or else you'll be miserable until you do."
It worked. First-year sales were 1.8 million. The next year, 1999, saw 14 million Furbys burrow into the hearts and wallets of families everywhere. By the end of the first Furby run, Hasbro sold 40 million around the world.
Resistance is futile
A rerelease of the Furby occurred in 2005 but didn't make as big a splash and faded away by 2007.
RIP, Furby... until now.
Parents better gird themselves for some more nagging from their kids. Hasbro is releasing the new Furby, one now ready for the iOS-age. Owners can interact with their Furbys via iPad, iPod Touch, and iPhone with a free downloadable app.
The new Furby has almost as many personalities as Sybil, and can be totally unpredictable. Treat it nicely, and it will act nicely. Shake it upside down and watch out. It could display a taste for human flesh. Just keep your finger away from its beak.
The original Furby helped propel Hasbro's stock price up 82% between October 1998 and the end of April 1999. But despite Furby sales, Hasbro soon found itself in deep debt after acquiring a spate of companies -- including the company that originally developed the Furby -- and from its then-peak of $35 a share, it fell to less than $10.
But that financial picture is completely different now. Hasbro has had double-digit returns on invested capital since 2006. It has a current P/E under 14 and offers a dividend with a 3.95% yield. The dividend-to-free-cash-flow ratio is a viable 57%. It has $780 million in cash and cash equivalents as of the end of June and long-term debt of $1.4 billion. None of that debt is due this year, but $440 million is due to be paid back in 2014.
With Hasbro's present good financial condition and the potential of the new Furby to become a money-making machine, I think the company will be working overtime to fulfill Furby orders. I've got to give Hasbro a thumbs-up in my CAPS account. Please let me know what you think.
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The article This Little Hair Ball Could Make You a Lot of Money originally appeared on Fool.com.
Fool contributor Dan Radovsky has no financial position in the above-mentioned companies. The Motley Fool owns shares of Amazon.com and Hasbro. Motley Fool newsletter services have recommended buying shares of Amazon.com and Hasbro. Motley Fool newsletter services have recommended creating a bull call spread position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.