Mattel, Inc.'s (NASDAQ:MAT) Has Found A Path To Profitability

By
Simply Wall St
Published
December 09, 2020

Mattel, Inc. (NASDAQ:MAT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Mattel, Inc., a children’s entertainment company, designs and produces toys and consumer products worldwide. The US$5.6b market-cap company posted a loss in its most recent financial year of US$214m and a latest trailing-twelve-month loss of US$3.7m shrinking the gap between loss and breakeven. As path to profitability is the topic on Mattel's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Mattel

According to the 13 industry analysts covering Mattel, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$66m in 2020. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 61%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:MAT Earnings Per Share Growth December 9th 2020

We're not going to go through company-specific developments for Mattel given that this is a high-level summary, but, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Mattel currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Mattel which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Mattel, take a look at Mattel's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:

  1. Valuation: What is Mattel worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Mattel is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Mattel’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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