NEW YORK (CNN/Money) -
What do Mickey Mantle, Bazooka Joe and Martha Stewart have in common?
You can collect them all from The Topps Co. (up $0.21 to $9.06, Research), an issuer of baseball cards since 1951 and a producer of novelty candy like Bazooka gum. But the once-universal fascination over sports cards has gone the way of stickball and marbles, threatening Topps' future, according to analysts.
"The conventional wisdom in that industry is that kids would rather play video games than collect baseball cards," said analyst Jim Barrett of C.L. King & Associates, an independent research firm based in New York.
But analysts give Topps credit for trying to stay on top of trends. It has begun issuing a series of collector cards called Topps Chronicles that commemorate current events . A card called "Taste of Freedom" capitalized on the media frenzy surrounding Martha Stewart's release from prison. Other cards in the Topps Chronicles collection spotlighted Johnny Carson's death and the Iraqi election.
Still, will that be enough to get investors excited in the company again? Shares trade at about $9, only 8 percent above their 52-week low.
So with baseball's Opening Day just about a week away, we decided to take a look at whether the stock is as valuable as an elusive Mickey Mantle 1952 Topps card ... or as worthless as a pack of Bazooka gum.
The next Pokemon?
The company's entertainment products division, which includes baseball and other sports cards, has seen, to paraphrase Bruce Springsteen, its glory days pass it by.
Sales from this business, which accounted for nearly half of the company's total sales in the first three quarters of its current fiscal year, increased a meager 5 percent from a year ago. Declining popularity of baseball cards isn't the only issue though. Competition from companies like Upper Deck, Playoff and Fleer has caused a glut of cards, and that has cheapened the value of them for collectors.
"The biggest problem with Topps is that they're in a business that doesn't grow anymore and hasn't for some time," said Dennis McAlpine, analyst for McAlpine Associates, an independent media and entertainment research firm. "There's too many cards and not enough interest."
Analysts said the company's best chance is to expand into new territory, and Topps has worked hard to keep up with the times. In the 1970s and '80s, the company started issuing Wacky Packs and Garbage Pail Kids cards, appealing to the gross-out sensibilities of adolescent males. More recently, the company enjoyed enormous success from Pokemon hysteria, with $180 million in sales from Pokemon products in 2001.
But that tumbled to just $6 million two years later. Fortunately, analysts said Topps did a good job of jumping into the Japanese fad while it was hot and unloading its massive inventory before it cooled down.
"The appeal to the stock is that they will identify the next Pokemon craze and astutely manage it again," said C.L. King's Barrett.
The problem is that there doesn't appear to be another Pokemon on the horizon.
A sour taste from candy
Kids may have lost their fascination for baseball cards but they still love candy. So that should help the company, right? Bazooka, a Topps product since the 1940's, has survived the ravages of time. The company also sells novelty candies with goofy names like Push Pop and Ring Pop.
But this business is facing challenges as well. Topps' confectionery sales in the first nine months of this fiscal year fell 5 percent from a year earlier. Topps said it plans to ramp up television advertising to bring more attention to its candy products.
Still, advertising might not work unless the company actually develops a new hit product that consumers want. "The confectionery business could help them hit double digits [in percentage sales growth] but in order to hit a home run they're going to have to come up with something different," said Robert Skloff, analyst for Sidoti & Co., an independent research firm that specializes in small cap stocks.
What's more, Topps said concerns about childhood nutrition are holding back candy sales.
Stock isn't in mint condition
The success of Topps depends on whether new growth initiatives like its current events-themed cards can take off. So far, the company has had mixed results.
Seizing on the popularity of eBay, the company formed eTopps, where customers can buy newly issued cards and post them on Topps' online bazaar. But the venture has failed to take off for lack of interest, analysts said.
And in an effort to revitalize the collectibles industry, Topps bought WizKids, a board game company, in 2003. With games like Pirates of the Spanish Main, kids use miniature ships to overcome obstacles like hidden reefs and scurvy. After a money-losing start, WizKids generated profits in the company's latest quarter.
Fortunately, Topps is in tip-top shape financially, with $117 million in cash and no debt. But the stock is volatile and not widely followed on Wall Street, with only three analysts covering it.
The shares trade at about 27.5 times earnings for the past 12 months, a steep price considering the slow-growth nature of Topps' card business and the difficulties in its candy division.
So investors looking at Topps stock might be better off buying the Martha Stewart card instead.
For more about Topps new current events cards, click here.
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Analysts quoted in this story do not own shares of Topps and their firms have no investment banking ties to Topps.