Investment Thesis
Mattel exhibits critical operational distress with -$102.7M operating loss and negative free cash flow of -$61.9M despite reasonable gross margins, indicating severe cost structure problems. The company cannot cover interest expense from operations (negative 3.4x coverage), relies on dwindling cash reserves to fund operations, and faces mounting financial stress with debt exceeding equity.
Strengths
- Solid gross margin of 44.9% indicates core product profitability
- Adequate liquidity with current ratio of 2.06x and $866M cash cushion
- Established market position in toy industry with recognized brands
Risks
- Negative operating cash flow (-$22.9M) and free cash flow (-$61.9M) signal unsustainable cash burn
- Operating income loss of $102.7M with negative interest coverage (-3.4x) means debt cannot be serviced from operations
- Declining revenue (-0.6% YoY) and diluted EPS (-21.5% YoY) indicate deteriorating fundamentals
- Debt-to-equity ratio of 1.11x combined with operating losses creates refinancing risk
- Extremely low returns on equity (2.9%) and assets (1.0%) reflect capital inefficiency
Key Metrics to Watch
- Operating cash flow trend and path to positive territory
- Operating income recovery and expense reduction initiatives
- Free cash flow sustainability and cash balance depletion rate
- Revenue growth acceleration and operating margin improvement
- Debt refinancing ability and covenant compliance
Financial Metrics
Revenue
862.2M
Net Income
61.0M
EPS (Diluted)
$0.20
Free Cash Flow
-61.9M
Total Assets
6.3B
Cash
866.0M
Profitability Ratios
Gross Margin
44.9%
Operating Margin
-11.9%
Net Margin
7.1%
ROE
2.9%
ROA
1.0%
FCF Margin
-7.2%
Balance Sheet & Liquidity
Current Ratio
2.06x
Quick Ratio
1.50x
Debt/Equity
1.11x
Debt/Assets
0.0%
Interest Coverage
-3.42x
Long-term Debt
2.3B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T15:39:11.272079 |
Data as of: 2026-03-31 |
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