Children's Products Stocks

Hasbro Inc Valuation – January 2019 $HAS

Company Profile (excerpt from Reuters): Hasbro, Inc. (Hasbro), incorporated on January 8, 1926, is a play and entertainment company. The Company’s operating segments include the U.S. and Canada, International, and Entertainment and Licensing. From toys and games to content development, including television programming, motion pictures, digital gaming and a consumer products licensing program, Hasbro fulfills the fundamental need for play and connection for children and families around the world. The Company’s Hasbro Studios and its film label, Allspark Pictures, create brand-driven storytelling across mediums, including television, film and digital. Its Franchise Brands are LITTLEST PET SHOP, MAGIC: THE GATHERING, MONOPOLY, MY LITTLE PONY, NERF, PLAY-DOH and TRANSFORMERS.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HAS – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,235,121,885 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.42 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 31.22% Fail
6. Moderate PEmg Ratio PEmg < 20 25.99 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.99 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.42 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.91 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.42
MG Growth Estimate 3.90%
MG Value $55.72
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $49.58
MG Value based on 0% Growth $29.06
Market Implied Growth Rate 8.74%
Current Price $88.86
% of Intrinsic Value 159.47%

Hasbro, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.71 in 2014 to an estimated $3.42 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.74% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Hasbro, Inc. revealed the company was trading above its Graham Number of $31.97. The company pays a dividend of $2.22 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 25.99, which was above the industry average of 25.63. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.27.

Hasbro, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.27
Graham Number $31.97
PEmg 25.99
Current Ratio 2.42
PB Ratio 5.99
Current Dividend $2.22
Dividend Yield 2.50%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $3,192,450,000
Total Current Liabilities $1,321,923,000
Long-Term Debt $1,694,721,000
Total Assets $5,495,329,000
Intangible Assets $1,304,622,000
Total Liabilities $3,608,048,000
Shares Outstanding (Diluted Average) 127,161,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.09
Dec2017 $3.12
Dec2016 $4.34
Dec2015 $3.57
Dec2014 $3.20
Dec2013 $2.17
Dec2012 $2.55
Dec2011 $2.82
Dec2010 $2.74
Dec2009 $2.48
Dec2008 $2.00
Dec2007 $1.97
Dec2006 $1.29
Dec2005 $1.09
Dec2004 $0.96
Dec2003 $0.85
Dec2002 -$0.99
Dec2001 $0.35
Dec2000 -$0.82
Dec1999 $0.93
Dec1998 $1.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.42
Dec2017 $3.48
Dec2016 $3.50
Dec2015 $3.01
Dec2014 $2.71
Dec2013 $2.50
Dec2012 $2.61
Dec2011 $2.56
Dec2010 $2.32
Dec2009 $2.00
Dec2008 $1.66
Dec2007 $1.40
Dec2006 $0.96
Dec2005 $0.68
Dec2004 $0.34
Dec2003 $0.04
Dec2002 -$0.21

Recommended Reading:

Other ModernGraham posts about the company

Hasbro Inc Valuation – March 2018 $HAS
Hasbro Inc Valuation – July 2016 $HAS
Hasbro Inc Valuation – January 2016 Update $HAS
Hasbro Inc. Analysis – August 2015 Update $HAS
28 Companies in the Spotlight This Week – 2/28/15

Other ModernGraham posts about related companies

Electronic Arts Inc Valuation – November 2018 $EA
Activision Blizzard Inc Valuation – June 2018 $ATVI
Mattel Inc Valuation – June 2018 $MAT
Hasbro Inc Valuation – March 2018 $HAS
Electronic Arts Inc Valuation – February 2018 $EA
Mattel Inc. Valuation – June 2017 $MAT
Hasbro Inc Valuation – July 2016 $HAS
Electronic Arts Inc Valuation – May 2016 $EA
Mattel Inc Valuation – January 2016 Update $MAT
Hasbro Inc Valuation – January 2016 Update $HAS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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