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					Buy Recommendation By Justin Ivory and Ryan Powell
Toy Industry Up to 2006
   CARR up 2.2%
   0 to 10 Group


  90% of Mattel’s
  Revenue Comes
From This Segment



 Population Growth
2005 Article: Growth Continues in Mass/Discount Channel
and Online Toy Sales
   RETAIL SALES IN THE U.S. TOY INDUSTRY DECLINED LESS THAN FOUR
   PERCENT IN 2005 to just over $21.3 billion compared to $22.1 billion generated the prior
   year, according to The NPD Group. Retail channel performance shows continued share
   growth in the Mass/Discount channel. The mass marketers and discounters represented 54
   percent of total toy sales in 2005, while Toy Stores represented 20 percent. Online toy sales
   continued to increase as well, generating over $1.3 billion in 2005, a 2.6 percent increase over
   the prior year, and accounting for approximately 6 percent of sales for the year.

   ALTHOUGH TOTAL TOY INDUSTRY SALES DECLINED IN 2005, MANY
   CATEGORIES, such as Building Sets and Learning/Exploration toys, PERFORMED
   VERY WELL, showing positive sales growth over the prior year.

   n addition, ENTERTAINMENT FRANCHISES LIKE DORA THE EXPLORER ARE
   DRIVING TOY SALES, and the Star Wars franchise has contributed to both the Action
   Figures and Building Sets categories.
   While some categories dropped in sales, there were still some impressive increases among
   some sub-categories. Although the Dolls category had a dollar sales loss of two percent in
   2005, various sub-categories such as Large Dolls, and Soft Dolls showed healthy increases of
   18 percent and 13 percent. THE GAMES/PUZZLES CATEGORY MAY HAVE
   DECLINED BY 9 PERCENT, BUT THE FAMILY BOARD/ACTION SUB-
   CATEGORY GREW 18 PERCENT, ELECTRONIC HANDHELD/TABLETOP
   GAMES GREW 14 PERCENT and Puzzles were up by 4 percent over the prior year.
              Company’s Future Focus
• Growing Birth Rate
        Baby Gear
• Children Health Movement
        The Smart Cycle:
           “Combining child fitness with learning and fun.”
• International Progress
        10% International CAGR Since 2000
        44% of Revenue From Outside of U.S.
• Movie Licenses
        Batman
        Speed Racer
        Kung Fu Panda
• American Girl Growth
        Movies
        New Stores
• Product Cost and Quality
        LEAN Manufacturing
        Cut Product Costs w/ Steel Rather than Zinc
                          Lead Toys
• Toy Recalls in mid- September have
   plummeted Mattel’s stock prices.

• Recalls are slowing while
   Mattel has implemented the “Three Point Checking System”

• "This Christmas could end up the safest one of all.“

That's the conclusion of an article about toy safety in the September 6,
2007 issue of Time Magazine focused on the cooperative efforts of TIA
and lawmakers to develop tough new toy safety inspection systems -
including a new proposed third-party testing accreditation program in
partnership with the American National Standards Institute (ANSI).
                             Other News
• The 2007 Holiday™ Barbie® Doll Anticipated to Top Lists this
Gift-Giving Season
   EL SEGUNDO, Calif. (October 16, 2007) - The 2007 Holiday™ Barbie® doll, a
   much anticipated and cherished holiday gift for children and adults alike, is
   officially released to stores for this year's gift-giving season. The first holiday-
   themed Barbie® doll was introduced in 1988 and continues to be one of the most
   popular collectible Barbie® dolls today. The annual introduction of the holiday-
   themed Barbie® doll brings generations of girls, women and collectors together in
   celebration of both the holidays and Barbie®, a doll that has inspired girls of all
   ages to be anything they want to be for nearly five decades.
   Created by Mattel designer Sharon Zuckerman, the 2007 Holiday™ Barbie® doll
   is the newest addition to a long tradition of festive and beautiful, holiday-themed
   Barbie® dolls. This year's doll epitomizes holiday glamour with a Santa-inspired
   "Miss Claus" look. The 2007 Holiday™ Barbie® doll features a strapless, crimson
   velvet gown trimmed with white faux fur, black lace and accessorized with a
   black, wide Santa-inspired belt. Dazzling earrings and necklace as well as
   glamorous white opera-length gloves, complete the ensemble.
   "The 2007 Holiday Barbie doll is the ultimate holiday keepsake, combining the
   warmth and spirit of the season with the glamour and beauty of Barbie" said Liz
   Grampp, director of marketing, Barbie Collector.
                         Other News
• Mattel Announces Voluntary Recall of Single Product (Oct. 29)

   EL SEGUNDO, Calif., - Mattel, Inc. announced that, as a result of the
   company's extensive investigation of toys manufactured prior to the
   implementation of the three-point check testing system, the company has
   voluntarily recalled a production run of a single product sold in three
   markets due to impermissible levels of lead.
                   Key Ratios
Ratios                 Mattel   Industry
P/E Ratio              14.22     17.22
Beta                    0.89     1.20
Return On Equity       23.93     25.00
Return On Assets       11.16     12.39
Price to Sales          1.27     1.86
Gross Margin           46.50     43.30
Operating Margin       12.85     16.33
Net Profit Margin       9.47     10.53
Payout Ratio           44.73     28.49
10 Year
Graph




          One Year
           Graph
                     Analysts
             (Other Than Motley Fool)

                        MarketWatch.com
Average Recommendation:                   OVERWEIGHT

Number of Ratings:                                   9

FY Report Date:                               12 / 2007

Last Quarter's Earnings:                          0.61

Year Ago Earnings:                                1.37

Average Target Price:                            28.00
Current Quarters Estimate:                        0.74
Current Year's Estimate:                          1.50
3 Period Growth Model
           &
   Relative Valuation
              Value Conclusions

Analysts’ Price = 28.00

Valuation Price = 21.00 Earning 15%
                    or 24.15

Relative Valuation = 25.21 (Average Return)

Average Price of 3 Methods = 25.79 or 23.44%
                 Final Conclusions

I expect this stock to rise as Christmas approaches
with the potential of a gain greater than our 15%
requirement depending on unforeseen events and a
bullish market.

Therefore, I believe Mattel (MAT) should be
purchased at its present day price of $20.89/share in a
quantity of 300 to 500 share (depending on cash
availability.) It should then be expected to rise to
approximately 24.00/share (15% return) with a good
chance that it will reach 25.74/share (23.44%) and
with an approximate 19% chance it will rise to
28.00/share (34% return.)
          Possible Stocks To Get Rid Of
• Mastercard (MA)
    Big Jump Yesterday b/c of Quarterly Profit
    Exaggerated Stock Price
    Close to 52 Week High
   Average Target Price = 167.00 or -11.7%
• Aetna
    Close to 52 Week High
    Target Price = 60.00 or 6.38%
•EMC Corporation (EMC)
    Close to 52 Week High
    Average Target Price = 27.00 or 6.34%
•Cisco (CSCO)
    Close to 52 Week High
    Average Target Price = 37.50 or 13.43%
           Possible Stocks To Get Rid Of
• Deutsche Bank (DB) or
  Bank of America (BAC)
      Sorry Aaron, they are sucking something awful
      Need to reevaluate the financial sector.
• Western Digital (WDC)
      Close to 52 Week High
      Average Target Price = 27.00 or 4.16%
      Just not performing.

				
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posted:7/3/2011
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