Global gaming and entertainment company Hasbro, Inc. (AT) recently announced its fourth quarter results, beating Street’s estimates for revenue and adjusted EPS by 7.5% and 37.5%, respectively. Additionally, 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 revenue and operating profit to grow in the low single digits in 2022. The stock has lost 3.6% in the past three months and is currently trading 7% below from its 52-week high of $105.73, which it reached in January. 5, 2022. Additionally, inflationary pressure on production costs and supply chain constraints make the company’s near-term outlook uncertain.
Here is what could influence the performance of the HAS in the months to come:
Revenue growth does not translate into improved bottom line
For the fiscal fourth quarter ended Dec. 26, 2021, HAS’s revenue jumped 17% year-over-year to $2.01 billion. The company’s total liabilities were $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 fell 16% year-on-year to $219.90 million. Its adjusted net income was $168.40 million, down 4% year-over-year. Additionally, its adjusted EPS came in at $1.21, down 5% year-over-year.
Unfavorable analyst estimates
Analysts expect HAS EPS to decline 36% in the current quarter, 9.5% in the next quarter and 1.7% in the current year. Additionally, its revenue is expected to decline 1.3% year-over-year to $1.15 billion for the quarter ending March 31, 2022.
In terms of asset turnover rate over the last 12 months, the HAS rate of 0.59% is 43.9% below the industry average of 1.04%. Likewise, its 12-month ROTA of 4.42% is 26% below the industry average of 5.96%. Additionally, the ROCE for the last 12 months and CAPEX/Sales of the stock of 15.60% and 2.15% are below the sector averages of 17.88% and 2.45%, respectively.
In terms of forward EV/S, HAS’s 2.49x is 85.9% better than the industry average of 1.34x. Likewise, its advanced P/S of 2.03x is 85.9% better than the industry average of 1.09x. Additionally, the stock’s non-GAAP P/E and P/CF of 18.59x and 15.01x are above industry averages of 14.18x and 11.52x, respectively.
POWR ratings don’t indicate enough advantage
HAS has an overall grade of C, which equates to a neutral in our POWR Rankings system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight different categories. HAS has a C rating for value, in line with its above-industry valuation ratios. In addition, HAS has a C rating for Stability, consistent with its beta of 1.05.
HAS also has a C rating for growth and sentiment. This is warranted as analysts expect its EPS and revenue to decline in the near term.
HAS is ranked No. 13 out of 22 shares in the D rating Entertainment – Toys and Video Games industry. Click here to also access the HAS Quality and Stability ratings.
Concerns about supply chain challenges and rising input and freight costs threaten HAS’ near-term prospects. As the stock looks overvalued at the current price level, it might be wise to wait for a better entry point.
How does Hasbro (HAS) compare to its peers?
Although HAS has an overall POWR rating of C, you may consider investing in the following entertainment stocks – toys and video games 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, the HAS has fallen -1.42%, compared to a -7.35% rise in the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
At Nimesh Jaiswal a fervent interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the key approach he follows while advising investors in his articles. Continued…