Hasbro (HAS)

Toy and entertainment company Hasbro (NASDAQ:HAS) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 8.3% year on year to $1.39 billion. Its non-GAAP profit of $1.68 per share was 2.9% above analysts’ consensus estimates.

Company Overview

Credited with the creation of toys such as Mr. Potato Head and the Rubik’s Cube, Hasbro (NASDAQ:HAS) is a global entertainment company offering a diverse range of toys, games, and multimedia experiences for children and families.

The toys and electronics industry presents both opportunities and challenges for investors. Established companies often enjoy strong brand recognition and customer loyalty while smaller players can carve out a niche if they develop a viral, hit new product. The downside, however, is that success can be short-lived because the industry is very competitive: the barriers to entry for developing a new toy are low, which can lead to pricing pressures and reduced profit margins, and the rapid pace of technological advancements necessitates continuous product updates, increasing research and development costs, and shortening product life cycles for electronics companies. Furthermore, these players must navigate various regulatory requirements, especially regarding product safety, which can pose operational challenges and potential legal risks.

Competitors in the toy and entertainment sector include Mattel (NASDAQ:MAT), Funko (NASDAQ:FNKO), and Jakks Pacific (NASDAQ:JAKK).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Hasbro’s demand was weak over the last five years as its sales fell at a 3.4% annual rate. This wasn’t a great result and is a sign of poor business quality.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Hasbro’s recent performance shows its demand remained suppressed as its revenue has declined by 10.1% annually over the last two years.

We can better understand the company’s revenue dynamics by analyzing its three most important segments: Consumer Products, Entertainment, and Wizards & Digital Gaming, which are 41.2%, 57.4%, and 1.3% of revenue. Over the last two years, Hasbro’s Entertainment revenue (content) averaged 514% year-on-year growth while its Consumer Products (toys, games, apparel) and Wizards & Digital Gaming (Wizards of the Coast) revenues averaged 16.2% and 1.3% declines.

This quarter, Hasbro reported year-on-year revenue growth of 8.3%, and its $1.39 billion of revenue exceeded Wall Street’s estimates by 3.2%.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Hasbro’s operating margin has been trending up over the last 12 months, but it still averaged negative 9.2% over the last two years. This is due to its large expense base and inefficient cost structure.

In Q3, Hasbro generated an operating margin profit margin of 24.6%, up 1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Hasbro’s EPS grew at an unimpressive 3.8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3.4% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

In Q3, Hasbro reported adjusted EPS of $1.68, down from $1.73 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 2.9%. Over the next 12 months, Wall Street expects Hasbro’s full-year EPS of $4.48 to grow 13.8%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Hasbro has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 15.4% over the last two years, better than the broader consumer discretionary sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Hasbro’s free cash flow clocked in at $224.1 million in Q3, equivalent to a 16.2% margin. This result was good as its margin was 2.6 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Hasbro’s five-year average ROIC was negative 2.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Hasbro’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Hasbro reported $620.9 million of cash and $3.32 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.15 billion of EBITDA over the last 12 months, we view Hasbro’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $65.6 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were happy that Hasbro's revenue and EBITDA outperformed Wall Street’s estimates. Full-year EBITDA guidance also exceeded expectations. However, "tariff volatility" looms over the toy market, and the stock traded down 2.5% to $73.26 immediately following the results.

Updated: December 3, 2025 at 9:05 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Hasbro.

We cheer for all companies serving everyday consumers, but in the case of Hasbro, we’ll be cheering from the sidelines. To begin with, its revenue has declined over the last five years. On top of that, Hasbro’s weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Hasbro’s P/E ratio based on the next 12 months is 16.2x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $91.54 on the company (compared to the current share price of $82.47).