Mattel (MAT): Evaluating Its Valuation After Surprise Earnings and Expanding Margins

Mattel (MAT) just released its second-quarter results, giving investors plenty to consider. The main surprise was that earnings surpassed expectations, even though revenue dipped slightly compared to last year. Gross margin increased significantly, and Mattel’s international business continued to make progress. Along with steady growth in its entertainment lineup, this combination is drawing interest from both toy enthusiasts and market watchers.

Looking beyond the headline numbers, Mattel’s recent performance presents a mixed story. The stock has gained around 5% over the past month, recovering some losses after a slow start to the year. However, it remains down about 6% from this time last year and nearly 19% lower compared to three years ago. In particular, management has been repurchasing shares while highlighting consistent demand in its Action Figures and Vehicles segments. This supports the company’s long-term strategy, even as overall growth continues at a modest pace.

With this combination of margin improvements and slight revenue decreases, the current price raises the question of whether Mattel presents a real opportunity, or if future growth is already reflected in its valuation.

Most Popular Narrative: 26% Undervalued

According to community narrative, Mattel's stock is considered significantly undervalued based on a blend of future growth expectations, margin projections, and analyst assumptions.

The company is accelerating its entertainment and content strategy (Mattel Studios, aiming for 1 to 2 films per year starting in 2026, and developing new animated and live-action franchises). This approach creates high-margin, recurring revenue streams that enhance net margins through IP licensing and multimedia monetization.

Curious about what is powering this buyside optimism? The narrative leans on profit forecasts and a bold price target, but it all hinges on the company unlocking surprising value from content and brand expansion. Want to discover the secret ingredient behind Mattel's future value? Find out which numbers are really driving that substantial price upside.

Result: Fair Value of $24.83 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Mattel’s heavy reliance on a few iconic brands, along with ongoing challenges from digital competition, could quickly derail the optimism in current forecasts.

Find out about the key risks to this Mattel narrative.

Another View: The SWS DCF Model Perspective

While community narratives point to undervaluation, our SWS DCF model also finds the stock undervalued by using projected cash flows instead of market multiples. However, are these forecasts realistic, or too optimistic?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Mattel for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Mattel Narrative

If this view doesn't sit right with you, or you want to dig deeper into Mattel’s numbers, you can craft your own perspective in just a few minutes. do it your way.

A great starting point for your Mattel research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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