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MATTEL INC. STOCK ANALYSIS By Kevin Johnson, Michael Brown, Jasen Laney, Annick Bendjo
“creating the future of play”
ABOUT MATTEL
Started in 1945 in Southern California by Elliot Handler
and Harold “Matt” Matson
One of the leading toy manufacturers in the world
Brands such as Fisher Price, Hot Wheels, Barbie
Barbie debuted in 1959
Hot Wheels debuted in 1968
Current CEO: Robert A. Eckert
RECOMMENDATION
Recommended to buy because:
Long term investment
Continuous growth
Market share leadership
Positive feedback from analysts
Positive SWOT analysis
Limited business issues
NET INCOME
Have not been in the red since 2000
Have made at least $230 million since 2001
Made $684.9 million in 2010 (highest in the last ten years)
(Mattel 2010 Annual Report)
QUICK RATIO
2008- 1.5
2009- 2.07
2010- 2.04
STOCK PRICE & EPS
Stock Price EPS
2006- $23.65 2006- $1.55
2007- $17.71 2007- $1.56
2008- $16.00 2008- $1.05
2009- $19.98 2009- $1.45
2010- $25.43 2010- $1.88
Stock price intra day?
(Mattel, 2011)
MATTEL VS. HASBRO
Mattel is a larger company
Both have had similar success
Hasbro has a higher EPS for last 4 years
COMPETITIVE CLIMATE
Court Case with MGA Entertainment over rights
to the “Bratz” toy line(*Mattel pays $309m)
Hasbro
Video game industry
(LexisNexis 2011)
INDUSTRY CLIMATE
Some Industry climate factors are
Rising distribution costs
Unpredictable market environment
Manufacturing costs
(Business Source 2011)
SWOT ANALYSIS
STRENGTHS •Market Share Leadership•Strong Brand Equity•Strong Supply Chain•Sustainability •Cost Structure Management
WEAKNESSES •Bargaining Power •Packaging Source*
OPPORTUNITIES•Cost cutting •Profit from new toys (Cars 2 and Green Lantern)•Acquisition of Hit Entertainment(Thomas The Train, Bob The Builder)
THREATS•Manufacturing rates•Ownership Rights (Bratz lawsuit)•Uncertain toy retailing environment
(Standard and Poor’s 2011)
MATTEL INC. VS. COMPETITORSDirect Competitor Comparison
MAT HAS JAKK
Market Cap: 9.43B 4.67B 497.01M
Employees: 31,000 5,800 828
Qtrly Rev Growth (yoy):
9.00% 23.10% 7.00%
Revenue (ttm): 6.24B 4.17B 750.92M
Gross Margin (ttm): 49.41% 50.04% 32.74%
EBITDA (ttm): 1.14B 729.36M 77.44M
Operating Margin (ttm):
15.71% 13.93% 6.63%
Net Income (ttm): 715.15M 370.42M 42.90M
EPS (ttm): 2.02 2.63 1.40
P/E (ttm): 13.59 13.19 13.21
PEG (5 yr expected): 1.00 0.74 0.85
P/S (ttm): 1.55 1.12 0.66
(Yahoo Finance 2011)
PACKAGING SUPPLIES
Sourced packaging supplies produced from Asia Pulp & Paper
Clean-cut swaths of Indonesian rainforests Threatened
species native to rainforests
(Greenpeace)
GREENPEACE CAMPAIGN
(Sustainable Manufacturing World)
RESOLUTION
Ordered packaging suppliers to stop buying from Asia Pulp &
Paper
Announced sustainable sourcing principles
Safeguard against buying wood fibers from rainforests
Increase recycled paper
Boost use of Certified wood products
(LA Times)
CHANGE OF LEADERSHIP
Neil Friedman
Resigned from President of Mattel Brands March 2011
Bryan Stockton
Appointed as Chief Operating Officer
Joined Mattel in 2000
Became head of International Division in 2003
Drove division revenue from 36% to 50%
(Zacks)
POSITIVE ANALYSIS
Stock Evolution
Market Evolution
Issues Fixed
Growing Opportunities
POSITIVE COMMENTS FROM FINANCIAL ANALYSTS
Buy or Hold on Follow stock evolution on the market.
1-Ja
n-11
1-Fe
b-11
1-Mar
-11
1-Ap
r-11
1-May
-11
1-Ju
n-11
1-Ju
l-11
1-Au
g-11
1-Se
p-11
1-Oct
-11
05
1015202530
23.0527.24
27.69
2011 Stock Evolution
Closing Value
Yahoo Finance
STOCK SAFETY GRADED WITH A 2
Consensus Recommendation Detailed Analyst Recommendation
NASDAQ, Stock Research - Analyst Summary
WHY IS THE OPINION POSITIVE?
Movie related toys have increased Mattel’s revenue
Increase in:
Gross profit
Revenue
Sales volume
Annual dividend
Savings
STOCK VALUE EVOLUTION
5/1/
06
11/1
/06
5/1/
07
11/1
/07
5/1/
08
11/1
/08
5/1/
09
11/1
/09
5/1/
10
11/1
/10
5/1/
110
5
10
15
20
25
30
13.4910.75
27.69
Stock Closing Value between 2006 and 2011
Closing Value
Yahoo Finance
THE TOY INDUSTRY SECTOR IS DOING WELL
2006 2008 2010 2012$70.000
$75.000
$80.000
$85.000
$90.000
$95.000
$78.308$77.472
$80.280
$89.900
World Toy Industry Market
U.S Billion
Toy Industry Association Inc.
POSSIBLE DIFFICULTIES
Wal-Mart and Target’s low price requirements
Kid’s games’ evolution toward non-standards games.
Low dollar
Competition:
Radica ‘s lost before Sony's PlayStation3,
Microsoft's Xbox 360 or Nintendo's Wii
LOW CONSTRUCTION RISK
Mattel’s construction facilities are located in countries
where
Cheap labor
politically stable
Raw materials are available from numerous
suppliers
POSITIVE EVOLUTION
Good Expectations
International Opportunities
Positive Ranking
Moral Values
Current News
CONCLUSION
Long term investment
Continuous growth
Market share leadership
Positive feedback from analysts
Positive SWOT analysis
Limited business issues
BIBLIOGRAPHYHasbro Inc. (2011). Retrieved October 1, 2011, from MSN Money:http://moneycentral.msn.com/investor/charts/chartdl.aspx?showchartbt=Redraw+chart&D4=1&DD=1&D5=0&DCS=2&MA0=0&MA1=0&C5=2&C5D=5&C6=2007&C7=3&C7D=2&C8=2007&C9=0&CF=0&symbol=HAS&nocookie=1&SZ=0&CP=0&PT=9
Hasbro, I. (2011). 2010 Annual report. Retrieved October 1, 2011from Corporateinformation:http://www.shareholder.com/visitors/DynamicDoc/document.cfm?DocumentID=2935&CompanyID=HAS&zid=4d6301e3
Mattel, I. (2011). Mattel subsidiaries 2006-2010. Retrieved October 1, 2011, from Financial History, Annual Reports, and Proxy Statements: http://investor.shareholder.com/mattel/financials.cfm
Mattel Inc. (2011). Retrieved October 1, 2011, from Yahoo Finance: http://finance.yahoo.com/q?s=MAT&ql=0
McGraw-Hill Company. (2011, 10 3). Standard and Poor's. Retrieved 10 3, 2011, from Mattel, Inc: http://www.netadvantage.standardandpoors.com.proxy-tu.researchport.umd.edu/NASApp/NetAdvantage/cp/showHTMLStockReport.do?type=html
Sethi, S. P., Veral, E. A., Shapiro, H. J., & Emelianova, O. (2010). Mattel, Inc.: Global Manufacturing. Journal of Business Ethics , 36.
BIBLIOGRAPHY (CONT) Gottlieb R., Are you selling internationally? Mattel, Jakks and Hasbro show why you
should. July 27, 2011http://www.globaltoynews.com/.services/blog/6a0133ec87bd6d970b0133ec87bd7e970b/search?filter.q=Mattel+Inc. Mattel Inc., 2010 Annual report.http://files.shareholder.com/downloads/MAT/1408792418x0x455252/1587E36E-D23A-4783-8AC3-A3ADE3FE9A6F/2010_Mattel_Annual_Report_Bookmarked_.pdf Mattel Inc., 2010 Annual report.http://investor.shareholder.com/mattel/releasedetail.cfm?ReleaseID=615012 Seidman, O., Stock Screen: Income Stocks with Worthwhile Total Return Potential,
September 26, 2011, retrieved October 21, 2011.http://www.valueline.com/Stocks/Screens_of_the_Week/Stock_Screen__Income_Stocks_with_Worthwhile_Total_Return_Potential_-_September_26,_2011.aspx Souers, M. (2011,October 1). Stock Report. Standard & Poor's Stock Reports. Retrieved
October 2, 2011, from Standard & Poor’s NetAdvantage database. http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/cp/showStockReport.do Van Kooten, M., Top 25 gaming companies 2010. 03 August 2010http://www.softwaretop100.org/top-25-gaming-companies-2010 Yahoo Financehttp://finance.yahoo.com/q/hp?s=MAT&a=00&b=1&c=2011&d=09&e=22&f=2011&g=m NASDAQ, Stock Research - Analyst Summary
http://www.nasdaq.com/symbol/mat/analyst-research
