Ah, Hasbro (HAS). My childhood was spent playing with cast iron Transformers and G.I. Joes with the kung fu grip. There were more fights at my dining room table during Monopoly games than in the bleachers at Fenway during a Yankee series. We all know Hasbro. There is no substitute for their products. If your kid wants a G.I. Joe, you get the kid a G.I. Joe. If he wants to play Pokémon- you better get the kid a Pikachu. Now if they would only make that Megan Fox action figure from the Transformer’s movie my life would be complete...
What it does:
Hasbro, Inc. engages in the design, manufacture, and marketing of games and toys. It produces many of the most sought after products in the market such as: Playskool, Transformers, Nerf, My Little Pony, Littlest Pet Shop, Tonka, G.I. Joe, Super Soaker, Milton Bradley, Parker Brothers, Cranium, Avalon Hill, Tiger, Strawberry Shortcake, and Wizards of the Coast.
But Hasbro is much more than a simple toy company. It has transformed (pun intended) these popular products into popular brands, slapping these characters and logos on anything and everything. Backpacks, underwear, lunchboxes, notebooks, shirts, cereal have all been graced with Optimus Prime, My Little Pony and the like. There is simply no substitute for a Transformer (anyone remember the Go-Bots?). Through its aggressive branding campaign Hasbro has created a wide competitive moat for its products.
The Fundamentals:
Current Stock Data |
| Seven Year Averages |
| ||||
Company: | Hasbro | Return on Equity: | 15.6% | ||||
Ticker: | Payout Ratio: | 28.7% | |||||
Price: | $44.61 | P/E Ratio-High: | 20.0 | ||||
EPS: | $2.87 | P/E Ratio-Low: | 13.0 | ||||
DPS: | $1.00 | P/E Ratio: | 16.5 | ||||
BVPS: | $10.91 | Sustainable Growth | 11.1% | ||||
P/E: | 15.5 | ||||||
Earnings Yield: | 6.4% | ||||||
Dividend Yield: | 2.2% | ||||||
P/BV: | 4.1 | T20YM.COM | |||||
Fundamentally, HAS is a sound stable investment. It has provided its shareholders with a decent 15.6% Return on Equity over the last 7 years. The average ROE for American companies over the same time period was 12%.
Furthermore, HAS has grown its Earnings Per Share consistently for the last 7 years, offering its investors an astronomical 28.4% Annual Compound Growth Rate over that time span.
HAS Company Data | |||||||||
Price |
| P/E Ratio | Payout | ||||||
Year | EPS | DPS | BVPS | High | Low | High | Low | ROE | Ratio |
2002 | 0.43 | 0.12 | 6.88 | 17.30 | 9.87 | 40.2 | 23.0 | 6.3% | 27.9% |
2003 | 0.98 | 0.12 | 8.01 | 22.63 | 11.23 | 23.1 | 11.5 | 12.2% | 12.2% |
2004 | 0.96 | 0.21 | 9.25 | 23.33 | 16.90 | 24.3 | 17.6 | 10.4% | 21.9% |
2005 | 1.09 | 0.33 | 9.69 | 22.35 | 17.75 | 20.5 | 16.3 | 11.2% | 30.3% |
2006 | 1.29 | 0.45 | 9.57 | 27.60 | 17.00 | 21.4 | 13.2 | 13.5% | 34.9% |
2007 | 1.97 | 0.60 | 9.54 | 33.49 | 25.25 | 17.0 | 12.8 | 20.6% | 30.5% |
2008 | 2.00 | 0.78 | 9.99 | 41.68 | 21.57 | 20.8 | 10.8 | 20.0% | 39.0% |
2009 | 2.48 | 0.80 | 11.69 | 32.57 | 21.14 | 13.1 | 8.5 | 21.2% | 32.3% |
EPS | DPS | BVPS | High | Low | |||||
Annually Compounded Rates of Growth (7 year) | |||||||||
28.4% | 31.1% | 7.9% | 9.5% | 11.5% | |||||
Annually Compounded Rates of Growth (3 year) | |||||||||
24.3% | 21.1% | 6.9% | 5.7% | 7.5% | |||||
When we take HAS's past compound growth rate and model the company’s future EPS with this ratio the results are overwhelming:
| |||||
Year | EPS | DPS |
| ||
Current | $2.87 | $0.82 | Earnings after 10 years | $35.08 | |
2012 | $3.69 | $1.06 | Sum of dividends paid over 10 years | $42.58 | |
2013 | $4.73 | $1.36 |
| ||
2014 | $6.08 | $1.75 | Projected price (Average P/E * EPS) | $578.54 | |
2015 | $7.81 | $2.24 | Total gain (Projected Price + Dividends) | $621.12 | |
2016 | $10.03 | $2.88 |
| ||
2017 | $12.89 | $3.70 | Projected return using historical EPS growth rate | 30.1% | |
2018 | $16.55 | $4.75 |
| ||
2019 | $21.26 | $6.10 |
| ||
2020 | $27.31 | $7.84 |
| ||
2021 | $35.08 | $10.07 | T20YM.COM | ||
Clearly these EPS ratios are lofty. They assume that the high flying Hasbro can continue its tremendous growth rate moving forward. But even at half these rates we are looking at a 15% gain, making Hasbro a very attractive long term investment.
Returning Value to Shareholders:
For the last 7 years Hasbro’s dividend growth rate has been on an absolute tear at nearly 32%. Additionally, HAS's payout ratio is hovering around 29%. This leaves plenty of room for dividend growth. Currently Hasbro is paying a dividend of $1 while yielding a respectable 2.26%.
The Technical:
The chart for Hasbro is concerning. The stock was in full scale rally mode until January where the company made a preannouncement lowering 4th quarter estimates. This caused the stock to plummet through the 50 day MA and test the 200 day MA at 43.37. The stock did bounce of its 200 DMA but has not displayed much follow through. I expect that the stock will sell off until earnings and then reestablish itself. The preannouncement took the market by surprise but it was nothing to worry about.
The MACD is trending back up and the RSI is indicating a hugely oversold level. I think the stock is preparing to rally and will be looking to start a position shortly after earnings.
Overview:
I believe Hasbro is a tremendous growth stock with an impressive dividend growth rate and low payout ratio. Currently the stock is under pressure due to a slightly negative preannouncement. The fundamentals of the company are strong and have not changed. Hasbro has transformed itself from a toy maker into a powerhouse of iconic brands. The company is the clear leader in its market with a large competitive moat.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HAS over the next 72 hours.
