Doing More with its Toys
Hasbro, Inc. (NASDAQ:HAS) has taken a fairly aggressive stance in its brand development efforts in recent years. For example, while toy sales remain the core of the business, it has been creating content based on brands like My Little Pony and Pound Puppies through a joint venture with Discovery Communications Inc. (NASDAQ:DISCA) called Hub. That content has also found its way to online distribution partners like Netflix, Inc. (NASDAQ:NFLX).
Getting kids to fall in love with the toys through what amounts to half hour long commercials isn’t the only approach Hasbro, Inc. (NASDAQ:HAS) is taking. It’s also creating movies, for the big screen and for the direct to video market, and video games. That latter area was materially bolstered by the planned $112 million purchase of a controlling stake in Backflip.
Backflip will continue as an independent company making its own titles, but it will also start to work on games for Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) Android based phones and tablets. The backlog of great brands is nothing short of impressive. Toy based games are one thing, but Hasbro, Inc. (NASDAQ:HAS) is one of the largest makers of board games and card games. More aggressive use of high profile games like Monopoly, Clue, Candyland, and Risk could really push sales in a crowded field without many brand names.
Not the Best Results
Hasbro, Inc. (NASDAQ:HAS)’s sales, though, haven’t really gone anywhere for the past five years, hovering around the $4 billion mark. There was a brief pop in 2011, when sales spiked to nearly $4.3 billion, but they dropped back to $4.1 billion last year. Earnings, meanwhile, are at about the same place they were around four years ago, coming in at $2.55 a share last year.
Profit margins have fallen in the last two years, but at around 13.5% are still a couple of percentage points above where they were a decade ago. That said, the trend here is still heading in the wrong direction.
Despite this somewhat anemic performance, the shares are near all time highs. The price to earnings ratio is about 18. Based on recent results, it’s hard to call Hasbro a growth stock. However, the turnaround story here is pretty compelling and the addition of a solid social game maker only adds to the allure. The 3.4% dividend yield and a long history of regular dividend increases could interest more aggressive income seekers looking for a turnaround play.
Bigger, Safer
Hasbro, Inc. (NASDAQ:HAS) clearly needs to take aggressive steps to get the top- and bottom-lines heading in the right direction. That’s compounded by the fact that it’s about a third the size of Mattel, Inc. (NASDAQ:MAT). And that’s not the only difference. After dipping during the 2007 to 2009 recession, Mattel’s top- and bottom-lines have since moved steadily higher. Moreover, its PE is around 18, in line with Hasbro’s. An around 3.3% yield and a history of regular, though not annual, dividend hikes rounds out the picture.
