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Valens Research

MAT - Valens Credit Report - 2021 05 20

CDS markets are overstating risk with a CDS of 232bps relative to an Intrinsic CDS of 127bps. Moody's is also overstating MAT's fundamental credit risk with its Ba2 credit rating three notches below Valens' IG4 (Baa2) credit rating

Incentive Dictates Behavior™ analysis highlights mixed signals for credit holders. Management's compensation framework should drive them to focus on improving all three value drivers: margins, top-line growth, and asset utilization, which should lead to Uniform ROA improvement and higher cash flows available for servicing obligations

Earnings Call Forensics™ analysis of the Q1 2021 earnings call (4/22) highlights that management is confident their adjusted operating income improved to $28 million this quarter and that they are strengthening their position in the toy industry following their third consecutive quarter of market share gains
Underlying
Mattel Inc.

Mattel is a global children's entertainment company that engages in the design and production of toys and consumer products. The company's portfolio of owned and licensed brands and products are organized into the following categories: Dolls, which include brands such as Barbie, American Girl, Enchantimals, and Polly Pocket; Infant, Toddler, and Preschool, which include brands such as Fisher-Price and Thomas & Friends, Power Wheels, Fireman Sam, and Shimmer and Shine (Nickelodeon); Vehicles, which include brands such as Hot Wheels, Matchbox, CARS (Disney Pixar), and Jurassic World (NBCUniversal); Action Figures, Building Sets, and Games, which include brands such as MEGA, UNO and WWE.

Provider
Valens Research
Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.

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