Hasbro Inc (HAS, Financial) experienced a daily loss of -1.52%, resulting in a 3-month gain of 11.32%. Despite a reported Loss Per Share of 1.85, our analysis aims to answer the question: Is Hasbro (HAS) modestly undervalued? Let's delve into the valuation analysis to understand the company's true worth better.
Company Overview
Hasbro is a leading global play and entertainment company with a rich portfolio of well-known brands such as Transformers, Nerf, and Magic: The Gathering. The firm's offerings range from toys and games to television programming, motion pictures, and a robust licensing program. Hasbro's strategic acquisitions, including Entertainment One in 2019 and a tie-up with Dungeons & Dragons Beyond in 2022, have strengthened its multichannel presence and diversified its offerings.
As of September 14, 2023, Hasbro's stock price stands at $68.13, while its GF Value, an estimation of the fair value, is $82.12. This discrepancy suggests that the stock might be modestly undervalued, paving the way for a deeper examination of the company's intrinsic value.
Understanding GF Value
The GF Value is a proprietary valuation model that estimates a stock's intrinsic value. It considers historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line represents the fair value at which the stock should ideally trade.
According to our GF Value, Hasbro (HAS, Financial) appears to be modestly undervalued. If the stock price is significantly above the GF Value Line, the stock is likely overvalued, implying poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued, suggesting higher future returns. Given Hasbro's current price of $68.13 per share, it appears to be modestly undervalued.
Due to its relative undervaluation, the long-term return of Hasbro's stock is likely to outperform its business growth.
Financial Strength Analysis
Investing in companies with poor financial strength can result in a high risk of permanent capital loss. To avoid this, investors must thoroughly review a company's financial strength before purchasing its shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Hasbro's cash-to-debt ratio of 0.05 ranks worse than 87.88% of 825 companies in the Travel & Leisure industry, indicating poor financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Hasbro has been profitable for 10 out of the past 10 years, with a revenue of $5.60 billion and a Loss Per Share of $1.85 in the past twelve months. However, its operating margin of 2.72% ranks worse than 61.34% of 820 companies in the Travel & Leisure industry.
Hasbro's 3-year average revenue growth rate is better than 65.45% of 767 companies in the Travel & Leisure industry. Its 3-year average EBITDA growth rate is 5.5%, which ranks better than 51.97% of 608 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) provides insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If ROIC exceeds WACC, the company creates value for shareholders. Over the past 12 months, Hasbro's ROIC was 2.21, while its WACC was 5.71.
Conclusion
In conclusion, Hasbro (HAS, Financial) appears to be modestly undervalued. Despite its poor financial condition, it exhibits strong profitability and growth, outperforming 51.97% of 608 companies in the Travel & Leisure industry. To learn more about Hasbro's stock, check out its 30-Year Financials here.
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