Mattel (MAT): Revisiting Valuation After a Recent 3-Month Share Price Rebound

Mattel (MAT) has been drifting in a tight range lately, even as the stock is up over the past 3 months. That makes this a good moment to revisit what the current price implies.

See our latest analysis for Mattel.

With the share price now at $19.97 and a solid 90 day share price return of 19.87 percent, Mattel’s momentum looks to be rebuilding even though the 1 year total shareholder return of 11.32 percent is more modest.

If this kind of steady recovery appeals to you, it could be a good time to explore fast growing stocks with high insider ownership as potential next wave candidates for your watchlist.

With earnings growing steadily and the share price still trading below analyst targets and some intrinsic value estimates, are investors overlooking a bargain in this classic toy maker, or is the market already baking in Mattel’s next leg of growth?

Price to Earnings of 14.4x, is it justified?

On a last close of $19.97, Mattel trades on a 14.4x price to earnings multiple that screens as undervalued against several valuation checkpoints.

The price to earnings ratio compares what investors pay for each dollar of current earnings, and it is a key lens for branded consumer and leisure names like Mattel where cash flows are established rather than hyper growth. At 14.4x, the market appears to be pricing in only moderate progress in profitability despite forecasts for ongoing earnings growth of 7.1 percent per year.

That discount looks starker when set against the wider landscape. The same 14.4x multiple sits well below the estimated fair price to earnings ratio of 16.8x, a level our fair value work suggests the market could gravitate toward if sentiment improves. It also undercuts the Global Leisure industry average multiple of 21.8x, and is markedly cheaper than the peer group average multiple of 72.9x, reinforcing the view that Mattel is trading at good relative value while still being forecast to deliver higher return on equity of 27.4 percent in three years.

Explore the SWS fair ratio for Mattel

Result: Price-to-Earnings of 14.4x (UNDERVALUED)

However, there are still risks, including reliance on blockbuster franchises and licensing partners, as well as any slowdown in consumer spending that could quickly cap valuation upside.

Find out about the key risks to this Mattel narrative.

Another View, SWS DCF Signals Deeper Upside

While earnings multiples suggest Mattel looks modestly cheap, our DCF model is more aggressive and indicates a fair value near $45.24 versus the current $19.97. If that long term cash flow view is closer to reality, is the market still underestimating Mattel’s earnings power?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Mattel for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 904 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Mattel Narrative

If you see the numbers differently or want to stress test your own assumptions, you can build a personalized view in minutes, Do it your way.

A great starting point for your Mattel research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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