Buy Recommendation By Justin Ivory and Ryan Powell
Toy Industry Up to 2006
CARR up 2.2%
0 to 10 Group
90% of Mattel’s
Revenue Comes
From This Segment
Population Growth
2005 Article: Growth Continues in Mass/Discount Channel
and Online Toy Sales
RETAIL SALES IN THE U.S. TOY INDUSTRY DECLINED LESS THAN FOUR
PERCENT IN 2005 to just over $21.3 billion compared to $22.1 billion generated the prior
year, according to The NPD Group. Retail channel performance shows continued share
growth in the Mass/Discount channel. The mass marketers and discounters represented 54
percent of total toy sales in 2005, while Toy Stores represented 20 percent. Online toy sales
continued to increase as well, generating over $1.3 billion in 2005, a 2.6 percent increase over
the prior year, and accounting for approximately 6 percent of sales for the year.
ALTHOUGH TOTAL TOY INDUSTRY SALES DECLINED IN 2005, MANY
CATEGORIES, such as Building Sets and Learning/Exploration toys, PERFORMED
VERY WELL, showing positive sales growth over the prior year.
n addition, ENTERTAINMENT FRANCHISES LIKE DORA THE EXPLORER ARE
DRIVING TOY SALES, and the Star Wars franchise has contributed to both the Action
Figures and Building Sets categories.
While some categories dropped in sales, there were still some impressive increases among
some sub-categories. Although the Dolls category had a dollar sales loss of two percent in
2005, various sub-categories such as Large Dolls, and Soft Dolls showed healthy increases of
18 percent and 13 percent. THE GAMES/PUZZLES CATEGORY MAY HAVE
DECLINED BY 9 PERCENT, BUT THE FAMILY BOARD/ACTION SUBCATEGORY GREW 18 PERCENT, ELECTRONIC HANDHELD/TABLETOP
GAMES GREW 14 PERCENT and Puzzles were up by 4 percent over the prior year.
Company’s Future Focus
• Growing Birth Rate
Baby Gear
• Children Health Movement
The Smart Cycle:
“Combining child fitness with learning and fun.”
• International Progress
10% International CAGR Since 2000
44% of Revenue From Outside of U.S.
• Movie Licenses
Batman
Speed Racer
Kung Fu Panda
• American Girl Growth
Movies
New Stores
• Product Cost and Quality
LEAN Manufacturing
Cut Product Costs w/ Steel Rather than Zinc
Lead Toys
• Toy Recalls in mid- September have
plummeted Mattel’s stock prices.
• Recalls are slowing while
Mattel has implemented the “Three Point Checking System”
• "This Christmas could end up the safest one of all.“
That's the conclusion of an article about toy safety in the September 6,
2007 issue of Time Magazine focused on the cooperative efforts of TIA
and lawmakers to develop tough new toy safety inspection systems including a new proposed third-party testing accreditation program in
partnership with the American National Standards Institute (ANSI).
Other News
• The 2007 Holiday™ Barbie® Doll Anticipated to Top Lists this
Gift-Giving Season
EL SEGUNDO, Calif. (October 16, 2007) - The 2007 Holiday™ Barbie® doll, a
much anticipated and cherished holiday gift for children and adults alike, is
officially released to stores for this year's gift-giving season. The first holidaythemed Barbie® doll was introduced in 1988 and continues to be one of the most
popular collectible Barbie® dolls today. The annual introduction of the holidaythemed Barbie® doll brings generations of girls, women and collectors together in
celebration of both the holidays and Barbie®, a doll that has inspired girls of all
ages to be anything they want to be for nearly five decades.
Created by Mattel designer Sharon Zuckerman, the 2007 Holiday™ Barbie® doll
is the newest addition to a long tradition of festive and beautiful, holiday-themed
Barbie® dolls. This year's doll epitomizes holiday glamour with a Santa-inspired
"Miss Claus" look. The 2007 Holiday™ Barbie® doll features a strapless, crimson
velvet gown trimmed with white faux fur, black lace and accessorized with a
black, wide Santa-inspired belt. Dazzling earrings and necklace as well as
glamorous white opera-length gloves, complete the ensemble.
"The 2007 Holiday Barbie doll is the ultimate holiday keepsake, combining the
warmth and spirit of the season with the glamour and beauty of Barbie" said Liz
Grampp, director of marketing, Barbie Collector.
Other News
• Mattel Announces Voluntary Recall of Single Product (Oct. 29)
EL SEGUNDO, Calif., - Mattel, Inc. announced that, as a result of the
company's extensive investigation of toys manufactured prior to the
implementation of the three-point check testing system, the company has
voluntarily recalled a production run of a single product sold in three
markets due to impermissible levels of lead.
Key Ratios
Ratios
Mattel
Industry
P/E Ratio
14.22
17.22
Beta
0.89
1.20
Return On Equity
23.93
25.00
Return On Assets
11.16
12.39
Price to Sales
1.27
1.86
Gross Margin
46.50
43.30
Operating Margin
12.85
16.33
Net Profit Margin
9.47
10.53
Payout Ratio
44.73
28.49
10 Year
Graph
One Year
Graph
Analysts
(Other Than Motley Fool)
MarketWatch.com
Average Recommendation:
Number of Ratings:
FY Report Date:
OVERWEIGHT
9
12 / 2007
Last Quarter's Earnings:
0.61
Year Ago Earnings:
1.37
Average Target Price:
28.00
Current Quarters Estimate:
0.74
Current Year's Estimate:
1.50
3 Period Growth Model
&
Relative Valuation
Value Conclusions
Analysts’ Price = 28.00
Valuation Price = 21.00 Earning 15%
or 24.15
Relative Valuation = 25.21 (Average Return)
Average Price of 3 Methods = 25.79 or 23.44%
Final Conclusions
I expect this stock to rise as Christmas approaches
with the potential of a gain greater than our 15%
requirement depending on unforeseen events and a
bullish market.
Therefore, I believe Mattel (MAT) should be
purchased at its present day price of $20.89/share in a
quantity of 300 to 500 share (depending on cash
availability.) It should then be expected to rise to
approximately 24.00/share (15% return) with a good
chance that it will reach 25.74/share (23.44%) and
with an approximate 19% chance it will rise to
28.00/share (34% return.)
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Possible Stocks To Get Rid Of
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 Sorry Aaron, they are sucking something awful
 Need to reevaluate the financial sector.
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 Just not performing.