Global play and entertainment company Hasbro, Inc. (HAS) recently reported its fourth-quarter earnings results, beating Street estimates for revenues and adjusted EPS by 7.5% and 37.5%, respectively. Moreover, the company’s Board of Directors declared a quarterly dividend increase of 3% to $0.70 per share. It also paid off $1.08 billion in long-term debt in 2021.

HAS expects its revenue and operating profit growth at a low-single-digit rate in 2022. The stock has lost 3.6% over the past three months and is currently trading 7% below its 52-week high of $105.73, which it hit on January 5, 2022. Moreover, the inflationary pressure on production costs and supply chain constraints make the company’s near-term outlook uncertain.

Here’s what could influence HAS’ performance in the upcoming months:

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the fiscal fourth quarter ended December 26, 2021, HAS’ revenue surged 17% year-over-year to $2.01 billion. The company’s total liabilities came in at $6.95 billion for the period ended December 26, 2021, compared to $7.86 billion for the period ended December 27, 2020.

However, its adjusted operating profit for the quarter declined 16% year-over-year to $219.90 million. Its adjusted net earnings came in at $168.40 million, representing a 4% year-over-year decrease. Also, its adjusted EPS came in at $1.21, down 5% year-over-year.

Unfavorable Analyst Estimates

Analysts expect HAS’ EPS to decrease 36% in the current quarter, 9.5% in the next quarter, and 1.7% in the current year. In addition, its revenue is expected to decline 1.3% year-over-year to $1.15 billion for the quarter ending March 31, 2022.

Low Profitability

In terms of trailing-12-month asset turnover ratio, HAS’ 0.59% is 43.9% lower than the industry average of 1.04%%. Likewise, its trailing-12-month ROTA of 4.42% is 26% lower than the industry average of 5.96%. Moreover, the stock’s trailing-12-month ROCE and CAPEX/Sales of 15.60% and 2.15% are lower than the industry averages of 17.88% and 2.45%, respectively.

Stretched Valuation

In terms of forward EV/S, HAS’ 2.49x is 85.9% higher than the industry average of 1.34x. Likewise, its forward P/S of 2.03x is 85.9% higher than the industry average of 1.09x. Moreover, the stock’s forward non-GAAP P/E and P/CF of 18.59x and 15.01x are higher than the industry averages of 14.18x and 11.52x, respectively.

POWR Ratings Don’t Indicate Enough Upside

HAS has an overall rating of C, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. HAS has a C grade for Value, in sync with its higher-than-industry valuation ratios. In addition, HAS has a C grade for Stability, consistent with its beta of 1.05.

HAS has a C grade for Growth and Sentiment as well. This is justified as analysts expect its EPS and revenue to decline in the near term. 

HAS is ranked #13 out of 22 stocks in the D-rated Entertainment - Toys & Video Games industry. Click here to access HAS’s ratings for Quality and Stability as well.

Bottom Line

Concerns over supply chain challenges and rising input and freight costs are threatening HAS' near-term prospects. As the stock looks overvalued at the current price level, it could be wise to wait for a better entry point.

How Does Hasbro (HAS) Stack Up Against its Peers?

While HAS has an overall POWR Rating of C, you might want to consider investing in the following Entertainment - Toys & Video Games stocks with a B (Buy) rating: DoubleDown Interactive Co., Ltd. (DDI), Spin Master Corp. (SNMSF), and SEGA SAMMY HOLDINGS INC. (SGAMY).

HAS shares were trading at $99.58 per share on Thursday afternoon, up $2.54 (+2.62%). Year-to-date, HAS has declined -1.42%, versus a -7.35% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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