With the upcoming quarterly earnings release amongst us on Thursday, I wanted to dive back into Mattel, talk about what the press is discussion, see what happened from my first analysis on Mattel, as well as the items I am looking for. As we all know, the market has taken a beating as of late, which has pushed prices lower, thus allowing me/pushing me to dive into another Mattel Stock Analysis to see what has changed.
The date of the first Mattel stock analysis that was performed was on July 12, 2014. The close price back then was $39.13. Yes, there is a 9 after that 3 and not a 0, so you can quit rubbing your eyes to see if a blurred image is covering that up! The stock was trading a smidge above $39, and then August hit, when I purchased the stock. The stock price at the date of purchase was $34.95. I picked them up after Q2 earnings release came out. Here are the highlights as well as why I purchased the stock then:
- Management’s savings initiatives were ahead of budget – saving $101M out of their $175M plan – much above 50% of the goal through half the year.
- Management understood their problems with Inventories from 2013 hurting their 2014 performance.
- Management recognized the hurting/aching of sales from the Barbie Class were down 15% Qtd 2014 vs 2013.
- Fisher Price was down 17% for the 6 months ended 2014 vs 2013
- American Girl dolls were up QTD and YTD from prior year
- The introduction of craft brands
- Large Name Brands: American Girl, Hot Wheels, Barbie, Fisher Price, WWE, Ninja Turtles, Dora, Toy story, Thomas & Friends – the list is insane
- 12 years of Dividend Increases
- P/E Ratio based on $2.50 earnings = 14
- Payout Ratio + Yield being approximately 60% and over 4.25%
- Current ratio at the Mattel stock analysis was (2,885/909) or 3.17 and the quick ratio, which is when stripping out inventory, prepaids and other assets, essentially leaving Accounts Receivable and Cash = (1,397/909) or 1.54 = still pretty good for a company, especially for Mattel. This shows it can pay it debts off fairly quick and then some, especially in the more severe situations.
Mattel Stock Analysis Today
- Losing the Disney Princess & Frozen Brands in 2016 to Competitor Hasbro (HAS), this hurts, but we will have to see what that Brand is over a year from now. My best bet is it will still be popular, which actually bodes well for Mattel with 2 big Christmas seasons under their brand
- MEGA Brands acquisition 5+ months later. I feel this will add quite a bang to the revenue total for Mattel’s Crafts & construction toy line.
- I am estimating between $1.03 – $1.05 EPS figure for this quarter. Which I think this places it on pace with a solid $2.25-$2.35 EPS for the year.
- With a rough estimate of $2.30 EPS for the year, the stock is trading at $30.15 right now or a 13.01 Price to Earnings (P/E) ratio.
- The stock has tumbled 13.73% since I purchased the company. It is now astonishingly down 36-37% year-to-date. This has been one of the worst performing stocks of the S&P, still sitting at $10B in market capitalization.
- With EPS of my own estimate being $2.30 on the year, brings the payout ratio to 66% based on $0.38/quarter. Now, if earnings beat my expectation of $1.03 for the quarter, I will apply that percentage of being above my own to the overall EPS estimate of $2.30.
- Yield at the close of $30.15 = 5.04% = amazingly high for Mattel. Too High?
- Another 3 months of savings initiatives to be achieved to help their margin. Further, the old Branding Officer – Richard Dickson is back and has now more than a full quarter to have had his hands in the trenches of bringing the brands back alive.
Conclusion on Mattel Stock Analysis
Again, I will wait for Thursday’s earnings release. This will essentially paint the picture of what is to come for Mattel in their Q and year to date performance. If EPS is higher than expected, you can more than likely point it at these items: Barbie & Fisher price had better sales, more craft/construction revenue and further cost savings. What are your thoughts on this stock? Is the Mattel stock analysis missing pieces to the puzzle I am missing out on? Have you purchased any of the stock recently? What are your thoughts on at these levels and what would you look for before investing either for your first time or again? Thanks everyone, appreciate the help and hope you enjoyed the revamped & updated Mattel stock analysis.