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Goldman Sachs Downgrades Mattel (MAT) to Sell

Stocks in this article: MAT

NEW YORK (TheStreet) -- A Goldman Sachs downgrade to Mattel (MAT) will likely give investors pause on Tuesday. By mid-morning, shares had tumbled 1.5% to $45.92.

Analysts at the investment bank gave the toymaker a "Sell" rating with a $40 price target, a downgrade from a previous "Neutral" rating. The ratings revision was due to channel checks indicating domestic sales have decelerated. 

TheStreet Ratings team, however, reiterates Mattel INC as a Buy with a ratings score of A+. The team has this to say about their recommendation:

"We rate MATTEL INC (MAT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MAT's revenue growth has slightly outpaced the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 6.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 28.77% which was in line with the performance of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MAT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for MATTEL INC is rather high; currently it is at 55.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.15% is above that of the industry average.
  • MATTEL INC has improved earnings per share by 16.3% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, MATTEL INC's EPS of $2.21 remained unchanged from the prior years' EPS of $2.21. This year, the market expects an improvement in earnings ($2.74 versus $2.21).
  • Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that MAT's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.56 is high and demonstrates strong liquidity.

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