TSC Ratings' Updates: Mattel

The El Segundo, Calif., company's revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenue increased by 9.1%. Growth in revenue, however, does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share (EPS).

The current debt-to-equity ratio, 0.44, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the leisure equipment and products industry and the overall market on the basis of return on equity, Mattel has underperformed in comparison with the industry average but has greatly exceeded that of the S&P 500.

We consider its gross profit margin of 48.1% strong. Regardless of Mattel's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.1% trails the industry average.

Mattel's EPS declined by 50% year-over-year in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Mattel increased its bottom line by earning $1.59 a share, vs. $1.55 in the prior year. For the next year, the market is expecting a contraction of 8.8% in earnings ($1.45/share, vs. $1.59/share).

Mattel had been rated a hold as of April 22.