Mattel, Inc. (MAT): Is This Toy Company a Good Buy After Its Recent Drop?

JAKKS Pacific, Inc. (NASDAQ:JAKK) is the smallest company among the three. It is trading at $6.30 per share with a total market cap of around $138.5 million. As its EBITDA is negative in the past twelve months, its EBITDA multiple is not valid. The price-to-sales ratio is only 0.23.

Recently, the company’s share price plunged as much as 37% after its sluggish second-quarter results. In the second quarter, the revenue declined 27% to more than $106 million while the loss per share came in at as much as $2.14. Moreover, the company also lowered its full year revenue guidance, from a range of $694 million-$700 million to $620 million. The full year net income guidance was also reduced from a profit of $0.63 – $0.68 per share to a loss of $2.56 per share.

Several months ago, billionaire Patrick Soon-Shiong accumulated $9 million worth of shares of JAKKS Pacific, Inc. (NASDAQ:JAKK) as he wanted to develop the next generation of interactive technology-based toys, through a joint venture named DreamPlay Toys LLC, between Soon-Shiong’s NantWorks LLC and JAKKS. NantWorks’ iD image recognition technology was reported that it would be able to recognize speech, video, 3D objects and data, and it could be incorporated into DreamPlay products along with The Walt Disney Company (NYSE:DIS)’s characters.

If Soon-Shiong’s products become a boom in in the marketplace, JAKKS could be a huge winner for investors. However, it is quite hard to figure out the probability of its success now.

My Foolish take

Income investors could choose both Hasbro and Mattel, Inc. (NASDAQ:MAT) for their portfolios with their decent dividend yields and strong global toy brands. Among the three, I like Mattel the most, thanks to its highest profitability level, with the highest ROIC at 16.52%. The ROIC of Hasbro ranked second, at only 8.8%, while JAKKS generated a negative ROIC at -30.74%.

The article Is This Toy Company a Good Buy After Its Recent Drop? originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Hasbro and Mattel. The Motley Fool owns shares of Hasbro. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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