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VIDEOSeven Reasons to Play With Hasbro
Company has advantage with release of Transformers, GI Joe movies.
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Toy companies can be tough to analyze at times -- mainly because there can be a large amount of seasonality, and because they can go through boom and bust cycles depending on whether or not their latest gadgets are a hit with the younger crowd.
But over time, there have been a couple of toy companies that have proven themselves. These include Hasbro (HAS) and Mattel (MAT). And I firmly believe that the pair are forces to be reckoned with well into the future. That said, today I’d like to dig a little deeper into Hasbro.
The Rhode Island-based company has been around for what seems like forever (in actuality, since the 1920s). Its sheer longevity is a major reason to like it -- but it's not the only reason. Toys under its umbrella include the Monopoly and GI Joe, both of which were introduced many years ago but are still popular today.
Some other things strike my fancy:
1. It’s coming off a better-than-expected second quarter with earnings just reported yesterday. It put up $0.26, whereas the Street was at $0.23. As a result, the full-year estimate could end up getting ratcheted higher. And if I’m right about that, it could draw a lot of eyes.
2. We're heading into busy season. September and December should be pretty decent quarters for seasonal reasons.
3. The Street doesn't expect a great deal of actual growth from 2009 to 2010. But I'd note that it trades at a respectable (roughly) 13.1 times this year’s estimate. That’s not too terrible, given that it’s expected to grow 9% per annum in the next 5 years. Just for reference, Mattel trades at about 15.4 times this year’s estimate and is expected to experience similar growth in the next 5 years.
4. Perhaps a recent Reuters article puts it best:
“This year, Hasbro has an advantage over Mattel because of a lineup of toys tied to movies such as Transformers: Revenge of the Fallen and G.I. Joe: The Rise of the Cobra. Summer movies tend to drive sales for corresponding toy brands -- a lift analysts consider much-needed in the recession.”
6. Let’s not forget about that dividend. I’m glad to see it hasn’t played around with that. By my math, the forward yield is better than 3%.
7. Executives ponied up and bought 30,000 shares since the beginning of the year -- north of $20, in fact, which is lots of coin. I don't think they’d do that unless they were upbeat about the company’s potential earnings down the line.
I’m hip on Hasbro, and I think the company would be more fairly valued north of $30 at this juncture.
Hey, have a great day!
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