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ROE REPORTER | DKAM

margins is one of the best ways to spot a high ROE business and measure the

strength of its competitive advantage.

Figure 7.

Figure 8.

Toys “R” Us went bankrupt in the U.S last year due to their private equity

owners saddling the business with too much debt. As you can see in Spin

Master’s stock price

(fig.9), all toy companies sold off on the news in 2018.

This is where their balance sheet of millions of dollars of cash becomes useful.

A lot of the small to medium sized

toy companies used Toy “R” Us as their

main distribution source. Wal-Mart and Target are aiming to fill the void for

toys, however they only want to deal with the large manufacturers and limit

their supply chain. This leaves a lot of the small players on the outside looking

in. The small companies are now vulnerable at a time when Spin Master is at

its strongest.

Figure 9.