In 2018, many investors expected Hasbro (HAS) to die a slow death.
Who wouldn’t after watching revenues plummet and multiple failed takeovers from Mattel (MAT) to Lionsgate (LGF.A).
Yet, the company managed a turnaround few expected.
Yesterday’s earnings built on a remarkable performance from 2020.
Their performance led Hasbro to be of the top five stock searches in our TrackstarIQ data.
But does it have the juice to keep going?
Revenue turnaround
To give you some context on the transformation, take a look at the revenues over the last decade.
Sales steadily climbed through 2017 and margins improved.
In 2018, the company was hammered by Toys’R’Us bankruptcy as they scrambled to find outlets for their products.
The impact was so severe that it lingered well into 2019.
And then things changed.
Margins and revenues substantially improved.
Total transformation
Today, they operate three business segments:
- Consumer products (52.1% of revenues)
- Wizards of the Coast & Digital Gaming (30.8% of revenues)
- Entertainment (17.1% of revenues).
Yesterday’s results saw earnings come in more than double estimates with revenue growing 54% YOY (partly due to the pandemic.)
Hasbro’s total gaming category, including all gaming revenue, most notably MAGIC: THE GATHERING and MONOPOLY which are included in Franchise
Brands in the table above, was $519M for Q2 2021, up 63% vs. $319M for Q2 2020 and $885M YTD 2021, up 34% vs. $659M YTD 2020.
Growth in franchise brands really stood out for the year-over-year performance.
That comes in spite of solid gaming sales in 2020 due to lockdowns.
Hasbro made some strategic decisions such as partnering with Paramount to enhance storytelling and content capabilities, investing in Boulder Media (Hasbro’s animation studio), as well as support Disney+ Star Wars and Marvel.
The company boasts a robust balance sheet that’s seen long-term debt decrease year after year.
Plus, it offers a healthy 2.62% dividend payout.
Stacking Hasbro up against Mattel, the two stocks are priced similarly from a price-to-earnings ratio (P/E) ratio.
However, Hasbro boasts higher margins as well as recent growth.
Our hot take
With a current P/E ratio of 33x the prior 12 months’ earnings and a forward ratio of 30x, it’s not exactly cheap.
It’s unlikely the company can keep the current pace of topline growth.
However, with analysts predicting single-digit percentage increases, there could be some serious upside potential.
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