While not a mind-blowing move, it is good to see that the Mattel, Inc. (NASDAQ:MAT) share price has gained 15% in the last three months. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 52%, which falls well short of the return you could get by buying an index fund.
Mattel isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last five years Mattel saw its revenue shrink by 6.7% per year. While far from catastrophic that is not good. With neither profit nor revenue growth, the loss of 8.7% per year doesn't really surprise us. We don't think anyone is rushing to buy this stock. Not that many investors like to invest in companies that are losing money and not growing revenue.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Mattel is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Mattel in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We've already covered Mattel's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Mattel shareholders, and that cash payout explains why its total shareholder loss of 47%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 17% in the last year, Mattel shareholders lost 2.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 8.0% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Mattel , and understanding them should be part of your investment process.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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