TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

If you grew up in the late 1980’s or early 1990’s, you are familiar with Build A Bear Workshop (NYSE: BBW). They are a retail store in many malls that allow customers to build a teddy bear from scratch. You customize the bear to your exact liking, get a certificate and a box to take him or her home in.

In the beginning, building your own teddy bear and customizing to you or your kids exact tastes was all the rage. But over the years, the novelty has slowly worn off.

Build A Bear Workshop stock went through some tough times and was looking to turn the corner. But then it hit a speed bump.

The question for investors is, is this speed bump temporary or a sign of things to come? In this post, we will walk through Build A Bear Workshop to see if it is a stock worth the underlying risk.

Build A Bear Workshop Background

Build A Bear Workshop began in 1997 and in the first 13 years in business, sold over 50 million customized teddy bears to customers. But as the new wave of technology overtook the world, the interest in building stuffed animals began to wane.

The stock and earnings for Build A Bear Workshop plummeted.

The company was faced with a stark reality. Make changes or go out of business. Executives decided to double down and began to implement an aggressive turnaround plan that included closing some stores, rebranding existing stores, and expanding the offerings at these stores.

As earnings trickled in quarter after quarter, it appeared that the plan was working. Earnings and revenues were both growing. And they continued to grow for close to 4 years. Then the holiday season of 2016 hit.

When the results for the 2016 holiday shopping season came out, revenues were down 6% versus the previous year and profit was cut in half.

The stock took it on the chin.

The question now is whether this is a sign of more trouble for the retailer.

Looking Ahead With Build A Bear Workshop

While those earnings were disappointing to say the least, it appeared that this drop in revenue was temporary. In the next quarter, Build A Bear Workshop released earnings that saw earnings per share come in at -$0.10 which beat estimates by $0.10. Revenues rose 3%.

But it is clear that the future isn’t just rainbows and sunshine for this stock.

The reality is that mall traffic continues to decline. With fewer shoppers at malls, this means fewer customers coming into Build A Bear Workshop stores.

The obvious solution would be to go digital. The company is working on this and will hopefully not have a repeat of last year. This is when they pushed hard for customers to visit their online store to build a teddy bear.

The advertising campaign worked, but the website couldn’t handle the traffic.

Another potential bright spot for the company is working with toy manufactures to license out their characters. Currently there is a deal in place for Build A Bear to use My Little Pony in their stores.

The higher ups at the company also appear to believe in the stock, as in August they announced a large share buyback program.

Finally, analysts see the potential of EBITDA growth between 20-25% annually in 3 years.

Final Thoughts

So where does this leave the investor? Clearly there are issues with Build A Bear having retail locations in malls. But it is also clear that there is still demand for building teddy bears and other stuffed animals by the success of their digital marketing campaign last year.

And analysts believe in the company. As for me, if I had some play money sitting around, I might take a position in this stock. But I would be certain to set stop limits just in case my thinking was flawed and the dip in holiday sales was an omen and not a speed bump.