Over the past six months, Hasbro’s stock price fell to $80.55. Shareholders have lost 7.7% of their capital, which is disappointing considering the S&P 500 has climbed by 7.7%. This might have investors contemplating their next move.
Is now the time to buy Hasbro, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Hasbro Will Underperform?
Despite the more favorable entry price, we’re swiping left on Hasbro for now. Here are three reasons we avoid HAS, plus one stock we’d rather own.
1. Revenue Spiraling Downwards
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Hasbro struggled to consistently generate demand over the last five years as its sales dropped at a 2.5% annual rate. This wasn’t a great result and is a sign of poor business quality.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Hasbro’s EPS grew at 7.4% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2.5% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.
3. New Investments Aren’t Moving the Needle
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
Unfortunately, Hasbro’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.
Final Judgment
Hasbro doesn’t pass our quality test. Following the recent decline, the stock trades at 13.8× forward P/E (or $80.55 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere. We’d recommend looking at one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Hasbro
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