In this article, let's take a look at Hasbro Inc. (HAS, Financial), a $8.78 billion market cap company, which is a company with a broad portfolio of toys, games and entertainment offerings including brands such as Transformers, Playskool, Monopoly and My Little Pony.
Beating the Market
On March 19, we wrote about this stock and recommend buying it based on its international expansion, although its leader position in entertainment is threatened by the strong competition offered by traditional and new entertainment companies. In that previous article, we say that the PE relative valuation and the return on equity that significantly exceeds the industry average made me feel bullish, as well as the strong cash that can continually maximize shareholder´s value made me confident on this stock.
Today, the company reported better-than-expected earnings due to more sales of Transformers. The company reported $713.5 million in revenue, up 5% from the same quarter of the previous year and net revenue for Q1 increased 5% to $713.5 million beating analyst’s estimations. As a matter of fact, the stock jumped about $5 or 7%, to $70.59 today. So, if you had paid attention to my recommendation one month before, you'd won 16.67% in 30 days.
We continue believe that international operations are an important driver and the focus on emerging markets, like Brazil, China, Czech Republic, Colombia, Korea, Peru, Romania and Russia are regions that could accelerate growth in the future.
Hasbro CEO Brian Goldner said in a statement, that “2015 is off to a good start with continued momentum in our business, led by growth in all of our franchise brands and the underlying strength in demand across international markets, including the emerging markets".
Relative Valuation
In terms of valuation, the stock sells at a trailing P/E of 20.90x, trading at a discount compared to an average of 57.2x for the industry. To use another metric, its price-to-book ratio of 5.5x indicates a premium versus the industry average of 2.67x while the price-to-sales ratio of 2.00x is the same as the industry average.
Final Comment
As outlined in the article, international expansion is behind the potential stock upside. Hasbro's leader position in entertainment is threatened by the strong competition offered by traditional and new entertainment companies.
Hedge fund gurus like Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) bought the stock in the last quarter of 2014. Others like Jim Simons (Trades, Portfolio) and Tom Gayner (Trades, Portfolio) have taken long positions.
Disclosure: Omar Venerio holds no position in any stocks mentioned
