Since December 2024, Mattel has been in a holding pattern, floating around $19.10.
Is there a buying opportunity in Mattel, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Mattel Not Exciting?
We're cautious about Mattel. Here are three reasons why there are better opportunities than MAT and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Mattel’s sales grew at a sluggish 4.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector. 
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Mattel’s revenue to stall, close to its 4.1% annualized growth for the past five years. This projection doesn't excite us and suggests its newer products and services will not catalyze better top-line performance yet.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Mattel’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Mattel isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 11.7× forward P/E (or $19.10 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
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