Mattel (MAT) has dramatically underperformed the market in the last five years. Over this period, the stock has plunged 72% whereas S&P has rallied 52%. Consequently, the stock is now trading near its 10-year lows whereas S&P is trading at a fresh all-time high. As investors are often tempted to buy well-known stocks at multi-year lows, hoping for excessive returns, the big question is whether Mattel has eventually become a bargain.

Mattel has been greatly hurt by the secular shift in its business. There has been an unprecedented shift of children towards mobile phones and tablets, with most 3 to 5-year olds having access to a tablet. Mattel has failed to address this challenge effectively, as evidenced by its results. The company has posted declining revenues for five consecutive years. In addition, while it used to post a profit every year, it is now expected to post a loss for a third consecutive year.

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