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Mattel Looks Undervalued as Toys 'R' Us Weighs

We're lowering our fair value estimates for narrow-moat toy companies Mattel and Hasbro but still see value in former.

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Jaime Katz: We've recently made some changes to our fair values for narrow-moat toy companies Mattel and Hasbro in response to the recently announced liquidation of Toys 'R' Us. We've reduced our Hasbro fair value by $3, to $97, and our Mattel fair value to $21.50 as we made three major changes to our 2018 outlook while Toys 'R' Us liquidates.

First we took first-half sales down about 4% to 5% from where they were previously modeled for these businesses. While Toys 'R' Us represented about 8% to 9% of total sales in 2017, we believe this amount had been pruned back since the Toys 'R' Us initial bankruptcy announcement in September and had comprised a midsingle-digit level around the time of liquidation.

Jaime M. Katz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.