Mattel Stock Analysis: A Five Criteria Scorecard (2026)

Run through the Five Criteria as of 24 September 2026, Mattel stock passes on price and management but is only borderline on business quality, moat and balance sheet, so the framework puts it on the watchlist rather than the buy list. The shares look cheap, at a double-digit free cash flow yield on 2025 results. But returns on capital are inconsistent, tariffs are squeezing margins, and interest coverage sits just below our threshold. Here is the full scorecard, with sources.

Where this fits: this is a Five Criteria case study. It applies every step of the Five Criteria to one real company, using the process in how to research stocks.

This is an educational example, not a recommendation to buy or sell. Figures change every quarter, so check the latest filings before relying on them.

Mattel at a Glance

Mattel (NASDAQ: MAT) designs and sells toys and family entertainment. Its best-known brands are Barbie, Hot Wheels, Fisher-Price, American Girl and UNO. Ynon Kreiz has been CEO since 2018 and is also chairman.

The strategy is to turn those brands into wider entertainment franchises: films, games, licensing and consumer products. The 2023 Barbie film showed the upside, earning more than $1.4 billion at the global box office.

Key figures (as of 24 September 2026)

Metric	Figure	Source
Share price	About $13.12 (24 Sept 2026)	StockAnalysis
Shares outstanding	285.7 million (30 June 2026)	Q2 2026 release
Market value	About $3.75 billion	Price x shares
2025 net sales	$5,348 million, down 1%	FY2025 release
2025 operating income	$546 million (10.2% margin)	FY2025 release
2025 net income	$398 million	FY2025 release
2025 free cash flow	$411 million ($593m operating cash flow less $182m capex)	FY2025 release
Net debt, 31 Dec 2025	$1,089 million ($2,332m debt less $1,243m cash)	FY2025 release
2026 guidance	Sales +3% to 6% (constant currency); adjusted operating income $580m to $630m	Q2 2026 release

The share price has fallen sharply in 2026. According to The Motley Fool, the stock dropped about 25% in one day in February 2026 after fourth-quarter earnings missed expectations, with tariffs squeezing margins, and management guided to lower adjusted earnings in 2026 as it invests for growth.

Criterion 1: Is Mattel a Great Business?

The house test is ROIC of 15% or more for five years, a stable or rising gross margin, free cash flow of at least 90% of net income, and a capital-light model.

Returns on capital

Using Mattel’s annual reports filed with the SEC, we estimate ROIC as operating income after a 21% notional tax, divided by equity plus debt minus cash:

Year	Operating income	Invested capital (est.)	ROIC (est.)
2021	$730m	$3.4bn	about 17%
2022	$676m	$3.6bn	about 15%
2023	$562m	$3.2bn	about 14%
2024	$694m	$3.2bn	about 17%
2025	$546m	$3.3bn	about 13%

The five-year average is close to 15%, but two of the five years fall short. Go back further and the record is weaker: Mattel reported net losses in 2017, 2018 and 2019 before the turnaround.

Margins and cash conversion

Gross margin was 48.7% in 2025, down from 50.8% in 2024, and fell again to 48.2% in the second quarter of 2026 due to tariffs, inflation and higher royalties. Free cash flow of $411 million was about 103% of net income in 2025, which passes. Mattel outsources much of its manufacturing and runs a brand-led, fairly capital-light model.

Verdict: Borderline. Good cash conversion and decent recent returns, but ROIC is not consistently above 15% and margins are under pressure. See return on invested capital for how we calculate it.

Criterion 2: Does Mattel Have a Durable Moat?

The house test is a named moat source plus evidence that returns held up through a downturn.

The source is clear: intangible assets. Barbie and Hot Wheels are among the most recognised toy brands in the world, and Hot Wheels has a large adult collector following. In the second quarter of 2026, Hot Wheels drove a 14% rise in vehicle gross billings.

The evidence is weaker. The toy industry is competitive and partly hit-driven. Barbie billings fell in the second quarter of 2026, and Fisher-Price declined too. Large retailers hold significant bargaining power. Most importantly, returns collapsed in 2017 to 2019. Some of that was self-inflicted, but a strong moat should protect profits better than that.

Verdict: Borderline. Real brand assets, but returns have not proved durable through a bad period. Learn more in how to spot a competitive advantage.

Criterion 3: Is Management Aligned With Shareholders?

The house test is a flat or falling share count over five years, meaningful insider ownership and sensible capital allocation.

• Share count: diluted weighted shares fell from about 357 million in 2021 to 322 million in 2025, and shares outstanding were 285.7 million by June 2026. Management says it bought back more than $1.2 billion of stock over three years, about 18% of shares outstanding.
• Buybacks: $600 million in 2025, $300 million in the first half of 2026, and a new $1.5 billion programme expected to run to 2028. Buying back shares at depressed prices is sensible if the business holds up.
• Insider ownership: according to the 2026 proxy statement, the CEO beneficially owns about 1.4% and all directors and executive officers together about 1.9%, including options.
• Other capital allocation: Mattel pays no common dividend. In 2026 it bought full ownership of the Mattel163 mobile games studio and announced $150 million of strategic investments, which have yet to prove their returns.

Verdict: Pass, with a watch point. Shrinking share count and a meaningful CEO stake, but the push into games and entertainment must earn its keep. See the hierarchy of capital allocation.

Criterion 4: Is the Balance Sheet Sound?

The house test is net debt of no more than 2x EBITDA and interest coverage of at least 5x.

At the end of 2025, net debt was $1,089 million. Reported EBITDA was about $774 million, giving net debt of roughly 1.4x EBITDA, which passes. Mattel says it kept its investment-grade rating after refinancing $600 million of debt in late 2025.

Interest coverage is the weak spot. Operating income of $546 million covered interest expense of $119 million about 4.6 times in 2025, just under our 5x line. Toy sales are also seasonal: net debt was higher at mid-year, with cash of $524 million at 30 June 2026. And first-half 2026 operating income was negative, so coverage is tighter on a trailing basis.

Verdict: Borderline. Leverage is fine, but coverage is below 5x and earnings are falling. Read how much debt is too much.

Criterion 5: Is the Price Reasonable?

The house test is a free cash flow yield of 5% or more, or a price at least 25% below a conservative intrinsic value.

At about $13 a share, Mattel’s market value is roughly $3.75 billion. On 2025 free cash flow of $411 million, that is an FCF yield of about 11%.

Be conservative, because 2026 profits are guided lower. If free cash flow fell to $300 million, the yield would still be about 8%. Adding year-end net debt gives an enterprise value of roughly $4.8 billion.

Verdict: Pass. Even with a cautious cash flow estimate, the yield is well above 5%. See price to free cash flow.

The Mattel Five Criteria Scorecard

Criterion	House test	Mattel (as of 24 Sept 2026)	Verdict
1. Great business	ROIC 15%+ for 5 years; FCF 90%+ of net income	ROIC about 13% to 17%; FCF 103% of net income; margins falling	Borderline
2. Durable moat	Named source; held through a downturn	Brand intangibles; losses in 2017 to 2019	Borderline
3. Aligned management	Falling share count; insider stake	Shares down about 18% in 3 years; insiders about 1.9%	Pass
4. Sound balance sheet	Net debt/EBITDA 2x or less; coverage 5x+	About 1.4x; coverage about 4.6x	Borderline
5. Reasonable price	FCF yield 5%+	About 11% on 2025 FCF	Pass

Verdict: Watchlist, Not a Buy Candidate

The Five Criteria require a stock to pass all five before it becomes a buy candidate. Mattel passes two and is borderline on three. It does not fail any outright, so it is not a reject. The framework classifies it as watchlist.

This is a classic situation. The price is attractive precisely because the business is going through a difficult period. A cheap price is not enough if the business quality and moat are uncertain. That is how value traps happen.

What would move Mattel to “buy candidate”

• ROIC back above 15% and staying there, with gross margin recovering towards the roughly 50% management is guiding to for 2026.
• Interest coverage back above 5x, through higher operating income or lower debt.
• Evidence that Barbie and Fisher-Price can return to growth, and that the entertainment and games investments earn good returns.

What would move it to “reject”

• Free cash flow falling well below net income, or a drop that pushes the FCF yield below 5%.
• Net debt rising above 2x EBITDA, for example through debt-funded acquisitions.
• Continued declines in core brands, suggesting the moat is eroding.

Having worked in investor relations, I would watch the next two earnings calls closely for management’s explanation of margins and the returns on its strategic investments. That is where the verdict will be decided.

Common Mistakes When Analysing Mattel Stock

• Buying because it looks cheap. A low multiple on falling earnings can get cheaper.
• Over-weighting one hit film. Barbie was exceptional. Entertainment results are lumpy.
• Ignoring seasonality. Toy companies burn cash in the first half and earn it back in the fourth quarter. Always compare full years.
• Using adjusted figures only. Adjusted operating income excludes real costs such as restructuring. Check GAAP figures too.
• Forgetting tariffs. Much of Mattel’s production is outside the US, so trade policy directly hits margins.

Your Next Step

Build your own scorecard on a company you know, using the stock analysis checklist. Compare it with our Bank of America case study, and add borderline names like Mattel to your stock watchlist.

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About the author: Cameron Hayes is a senior investor relations and finance professional who has worked in IR at Nasdaq Copenhagen-listed companies including Nilfisk and Maersk Drilling. He holds an MSc from Copenhagen Business School and a BCom from the University of Ottawa, and founded Gingernomics to teach individual investors the Five Criteria framework. More about Gingernomics.

The content on Gingernomics is for educational and informational purposes only and does not constitute financial advice. Always do your own research and consult a licensed financial advisor before making any investment decisions. Past performance is not indicative of future results.