Hasbro (HAS): Buy, Sell, or Hold Post Q4 Earnings?

Hasbro’s 21.4% return over the past six months has outpaced the S&P 500 by 15.7%, and its stock price has climbed to $97.61 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is there a buying opportunity in Hasbro, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Hasbro Will Underperform?

We’re glad investors have benefited from the price increase, but we don't have much confidence in Hasbro. Here are three reasons there are better opportunities than HAS and a 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 have short-term success, but a top-tier one grows for years. Hasbro’s demand was weak over the last five years as its sales fell at a 3% 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 8.1% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

3. New Investments Fail to Bear Fruit as ROIC Declines

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Hasbro’s ROIC averaged 3.5 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Hasbro, we’ll be cheering from the sidelines. With its shares outperforming the market lately, the stock trades at 17.6× forward P/E (or $97.61 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d suggest looking at the most dominant software business in the world.

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