NEW YORK (TheStreet) -- Shares of Mattel Inc. (MAT) are lower by 1.43% to $31.61 on heavy volume in late afternoon trading on Wednesday, after it was announced the toy maker will lose the rights to Hasbro (HAS) to develop dolls based on Disney's (DIS) Princess and "Frozen" characters in 2016.
The popularity of "Frozen" themed dolls and toys helped to offset weakness in Mattel's Barbie segment, which fell 15% for the 2014 second quarter, the Associated Press reports.
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"We rate MATTEL INC (MAT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, MAT has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 & Products industry and the overall market on the basis of return on equity, MATTEL INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Net operating cash flow has increased to -$139.74 million or 37.46% when compared to the same quarter last year. Despite an increase in cash flow of 37.46%, MATTEL INC is still growing at a significantly lower rate than the industry average of 177.27%.
- The gross profit margin for MATTEL INC is rather high; currently it is at 51.04%. Regardless of MAT'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 2.66% trails the industry average.
- MAT, with its decline in revenue, underperformed when compared the industry average of 6.4%. Since the same quarter one year prior, revenues slightly dropped by 9.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: MAT Ratings Report