When we think about toys, some of the first brands we think about are Hasbro’s Transformers or Mattel’s Barbie.
Both Hasbro and Mattel are giants in the industry, each worth around $US9 billion in the stock market.
But when it comes to profitability, neither comes close to LEGO.
“Struggling a decade ago, LEGO now generates more EBITDA than Mattel and Hasbro combined (as of 2014),” Goldman Sachs analysts note.
EBITDA is short for earnings before interest, tax, depreciation, and amortization. It’s often referred to as operating earnings, or what’s left after you subtract costs and expenses from sales.
The analysts believe that LEGO’s recent success is at least party attributable to millennial parents attracted to toys that are “1) geared towards child development and 2) are levered to entertainment.”
“While improved execution played a part, we believe the appeal of LEGO’s open-ended play pattern and emphasis on learning and development have made it a top choice for Millennial parents,” the analyst write. “More recently, the company has embraced the industry’s movement towards entertainment properties with the 2014 release of The LEGO Movie, which grossed nearly $US500mn at the box office worldwide.”
LEGO is a monster.