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Does Hasbro Inc’s (NASDAQ:HAS) Debt Level Pose A Problem?

Hasbro Inc (NASDAQ:HAS), a large-cap worth US$10.95B, comes to mind for investors seeking a strong and reliable stock investment. Market participants who are conscious of risk tend to search for large firms, attracted by the prospect of varied revenue sources and strong returns on capital. However, the key to extending previous success is in the health of the company’s financials. I will provide an overview of Hasbro’s financial liquidity and leverage to give you an idea of Hasbro’s position to take advantage of potential acquisitions or comfortably endure future downturns. Note that this information is centred entirely on financial health and is a high-level overview, so I encourage you to look further into HAS here. Check out our latest analysis for Hasbro

How does HAS’s operating cash flow stack up against its debt?

Over the past year, HAS has ramped up its debt from US$1.72B to US$1.85B , which comprises of short- and long-term debt. With this increase in debt, the current cash and short-term investment levels stands at US$1.61B , ready to deploy into the business. Moreover, HAS has generated US$724.38M in operating cash flow during the same period of time, resulting in an operating cash to total debt ratio of 39.19%, signalling that HAS’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In HAS’s case, it is able to generate 0.39x cash from its debt capital.

Does HAS’s liquid assets cover its short-term commitments?

With current liabilities at US$1.25B, it appears that the company has been able to meet these commitments with a current assets level of US$3.63B, leading to a 2.9x current account ratio. For Leisure companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.

NasdaqGS:HAS Historical Debt Mar 17th 18
NasdaqGS:HAS Historical Debt Mar 17th 18

Does HAS face the risk of succumbing to its debt-load?

Hasbro is a highly levered company given that total debt exceeds equity. This is not unusual for large-caps since debt tends to be less expensive than equity because interest payments are tax deductible. Consequently, larger-cap organisations tend to enjoy lower cost of capital as a result of easily attained financing, providing an advantage over smaller companies. The sustainability of HAS’s debt levels can be assessed by comparing the company’s interest payments to earnings. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For HAS, the ratio of 10.65x suggests that interest is amply covered. High interest coverage is seen as a responsible and safe practice, which highlights why most investors believe large-caps such as HAS is a safe investment.

Next Steps:

Although HAS’s debt level is towards the higher end of the spectrum, its cash flow coverage seems adequate to meet obligations which means its debt is being efficiently utilised. Since there is also no concerns around HAS’s liquidity needs, this may be its optimal capital structure for the time being. I admit this is a fairly basic analysis for HAS’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Hasbro to get a more holistic view of the large-cap by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for HAS’s future growth? Take a look at our free research report of analyst consensus for HAS’s outlook.

  2. Valuation: What is HAS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether HAS is currently mispriced by the market.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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