Thursday, June 25, 2015

Analysis of Mattel


Mattel, an American toy producer

Company: Mattel

ISIN US5770811025 | WKN 851704  

Business: An American toy and family product producer. Their portfolio contains: Barbie®, the most popular fashion doll ever produced, Hot Wheels®, Monster High®, American Girl®, Thomas & Friends® and Fisher-Price® brands, including Little People® and Power Wheels®, as well as a wide array of entertainment-inspired toy lines.

Active: World wide with sales in 150 countries.

P/E: 18.6


This company was analysed due to a request from Falk posted on the Analysis Requests page. 

contrarian values of P/E, P/B, ROE as well as dividend for Mattel

The P/E for Mattel I find uncomfortably high with 18.6 and the P/B is also high with 3.1 which gives a clear no go from Graham. Their earnings to sales are at 8% which I find to be ok but I would have thought it to be higher. The ROE is good with 16.9% and the book to debt ratio is acceptable with 0.8.
The yearly revenue growth rate in the last five years have been only 0.6% which then gives us a motivated P/E of 8 to 10 which means that Mattel is today overvalued by the market.
They pay a very nice dividend of 5.6% which on the other hand correspond to over 100% of their earnings so they better start pushing up their earnings because otherwise they need to cut their dividend payment. They have share buy back programs but they keep the shares on the books which I do not like at all.

Conclusion: Graham says no to Mattel and so do I. I have read articles about Mattel before and was then very impressed by them but now when I took a look at them I lost a bit of my interest. They had a bad year in 2014 but a stronger dollar I assume that 2015 will not be a rose garden either and the Q1 result for 2015 were also not very impressive. So the only good thing is the ROE and the dividend and that is not good enough for me to get interested.

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2 comments:

Falk said...

Thanks für your analysis, Fredrik. I bought Mattel as a high yielder, but your analysis made me think again. I like investments with a nice upside and a limited downside. The downside is greater then I thought in the first place. And there are better opportunities then this possible turnaround story. So I sold my position and pocketed my small profit. Thank for saving me some money :)

Fredrik von Oberhausen said...

You are welcome Falk!

You seem to be a much better buyer and seller than me. I always get worried about selling since I am afraid that the old investment will perform better than the new one.

Still I know about my problem so hopefully I will be able to go around it.