10 Most Undervalued Quality Stocks To Buy According To Analysts

5. Mattel Inc. (NASDAQ:MAT)

Average Upside Potential: 19.42%

Forward Price-to-Earnings Ratio: 12.42

Number of Hedge Fund Holders: 31

Mattel Inc. (NASDAQ:MAT) is a multinational toy manufacturing and entertainment company known for its iconic brands such as Barbie, Hot Wheels, Fisher-Price, and American Girl. It designs, manufactures, and distributes a variety of toys and games for children of all ages. Its focus on innovation and storytelling has helped it maintain its position as a leading toy company.

In the second quarter of 2024, the company’s revenue declined by 0.69% year-over-year. Gross billings declined 2%, with growth in APAC offsetting declines in other regions. At the same time, the company gained market share globally, with strong performance in dolls, vehicles, and infant toys. Free cash flow increased to $826 million, and it repurchased $200 million of shares.

Segment-wise, however, doll sales declined, while vehicle sales increased. Fisher-Price grew double-digits, and the company gained market share in games. Mattel Creations, the D2C channel, continued to grow. It’s expanding its entertainment offerings with films, television shows, and digital gaming. The company expects the toy industry to decline modestly in 2024.

The company is focusing on growing its IP-driven toy business and expanding its entertainment offerings. It aims to increase profitability, gross margin, and cash generation. It expects long-term growth driven by innovation, market share gains, entertainment success, operational efficiencies, and a strong balance sheet. All of these factors make Mattel Inc. (NASDAQ:MAT) a top investment opportunity.

Longleaf Partners Fund stated the following regarding Mattel, Inc. (NASDAQ:MAT) in its Q2 2024 investor letter:

“Mattel, Inc. (NASDAQ:MAT)– Global toy and media company Mattel detracted for the quarter. The company reported what we viewed as solid quarterly results and an affirmation of 2024 guidance. We were particularly encouraged by their decision to increase their share repurchase program, which positions them well for FCF per share growth. As the quarter went on, however, the market focused on weaker consumer purchasing trends impacting Mattel and its peers. The market also seems to have moved past the success of last year’s Barbie movie, but we believe there is significant upside from media and entertainment revenue streams that are not yet reflected in today’s earnings expectations.”