Buy or Sell Mattel Stock?

Mattel (MAT) stock has fallen 25% during the past day, and is currently trading at $15.80. We believe there are several things to fear in MAT stock given its overall Weak operating performance and financial condition. This is aligned with the stock’s Low valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $5.0 Bil in market cap, Mattel provides globally designed and produced toys and consumer products, operating through multiple segments and selling directly via catalog, website, and proprietary retail stores.

[1] Valuation Looks Low

This table highlights how MAT is valued vs broader market. For more details see: MAT Valuation Ratios

[2] Growth Is Very Weak

• Mattel has seen its top line shrink at an average rate of -3.4% over the last 3 years
• Its revenues have fallen -2.4% from $5.4 Bil to $5.2 Bil in the last 12 months
• Also, its quarterly revenues declined -5.9% to $1.7 Bil in the most recent quarter from $1.8 Bil a year ago.

This table highlights how MAT is growing vs broader market. For more details see: MAT Revenue Comparison

[3] Profitability Appears Moderate

• MAT last 12 month operating income was $564 Mil representing operating margin of 10.8%
• With cash flow margin of 12.6%, it generated nearly $659 Mil in operating cash flow over this period
• For the same period, MAT generated nearly $432 Mil in net income, suggesting net margin of about 8.3%

This table highlights how MAT profitability vs broader market. For more details see: MAT Operating Income Comparison

[4] Financial Stability Looks Strong

• MAT Debt was $2.7 Bil at the end of the most recent quarter, while its current Market Cap is $5.0 Bil. This implies Debt-to-Equity Ratio of 53.5%
• MAT Cash (including cash equivalents) makes up $692 Mil of $6.6 Bil in total Assets. This yields a Cash-to-Assets Ratio of 10.5%

[5] Downturn Resilience Is Weak

MAT has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• MAT stock fell 40.7% from a high of $26.97 on 4 May 2022 to $16.00 on 15 March 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $22.32 on 4 September 2023 , and currently trades at $15.80

 
2020 Covid Pandemic

• MAT stock fell 50.7% from a high of $14.68 on 14 January 2020 to $7.23 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 19 November 2020

 
2008 Global Financial Crisis

• MAT stock fell 64.8% from a high of $29.65 on 5 April 2007 to $10.45 on 5 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 31 January 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read MAT Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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