The toy industry in the United States is a two-headed beast, with Hasbro, Inc. (NASDAQ:HAS) and Mattel, Inc. (NASDAQ:MAT) the major players. Most of us have likely come across one or more of the famous brands these companies carry.
Hasbro, Inc. (NASDAQ:HAS) has a product portfolio that most consumers would easily recognize: games including Monopoly and Scrabble, and toy brands including Nerf and G.I. Joe. Meanwhile, Mattel, Inc. (NASDAQ:MAT)’s stable of great brands includes Barbie, Hot Wheels, and the Fisher-Price and American Girl brands.
While these two companies might seem identical at first glance, there are some subtle differences between the two stocks that investors would be wise to consider before jumping in to either one.
A highly profitable toy story
It’s understandable that investors would have a hard time separating Hasbro, Inc. (NASDAQ:HAS) and Mattel, Inc. (NASDAQ:MAT) from one another. Their stocks trade with similar valuation profiles and they each carry similar dividend policies.
To illustrate, consider that Mattel, Inc. (NASDAQ:MAT) trades for 19 times trailing earnings and yields 3.2%, while Hasbro, Inc. (NASDAQ:HAS) exchanges hands for 17 times earnings and yields 3.5% at recent prices. Mattel, Inc. (NASDAQ:MAT) is the larger company of the two, with a market value almost three times Hasbro, Inc. (NASDAQ:HAS)’s.
The two companies have experienced varying degrees of success in terms of their underlying operations. This is where investors can see some divergence in performance.
2012 served as a difficult year for Hasbro, Inc. (NASDAQ:HAS). Hasbro saw revenues fall 4.5% year-over-year, and its diluted earnings per share fell 10% from 2011. Hasbro has had trouble digging itself out of the hole caused by the Great Recession. Its sales are barely above where they were back in 2009.
Mattel, Inc. (NASDAQ:MAT), meanwhile, realized 2% growth in net sales and diluted income per share in 2012 versus the prior year. Mattel has done a much better job getting its business back on track in the years since the financial crisis. Its sales are up 18% since 2009.
Their fiscal first quarter results continued this trend of Mattel materially outperforming its rival Hasbro. Mattel reported first-quarter revenues increased 9% year-over-year, whereas Hasbro was only able to realize 2% revenue growth as opposed to the first quarter of 2012.
Smaller competitor JAKKS Pacific, Inc. (NASDAQ:JAKK) might be a better fit for die-hard growth investors who aren’t afraid to roll the dice on a speculative bet. JAKKS Pacific, Inc. (NASDAQ:JAKK) carries a much smaller market capitalization of just $217 million and has seen a good deal of volatility in recent years, both in terms of its stock price and its underlying performance.