When my kids were young, there were two times a year that I went shopping for toys–during the holiday season and when they were home from school on summer vacation. So I thought that this would be a good time to take a look at the stock of the world's largest toy manufacturer: Mattel Inc. (MAT). My screens show that the massive toy company's fundamentals are rated an average C. Mattel is in a very competitive industry that is prone to pronounced buying cycles that impact its quarter-to-quarter cash flow and fundamentals. But MAT leads an industry that has a never-ending supply of new customers and an endless number of products it can bring to market.

NEXT: Sales Growth Grade »

Mattel's second-quarter sales increased a healthy 13.4% to 1.02 billion, which was in line with analysts' expectations. This compared with second-quarter sales from 2009 of $898 million. The company's sales were impacted negatively by the weakening of the euro, which made the products that Mattel manufactures and sells more expensive to European households. For this reason, MAT rates an average C in this category. Still, Mattel reported strong sales of its Hot Wheels line of toys and the company said that it also received a tremendous sales boost from its products that were featured in this summer's blockbuster "Toy Story 3." Mattel's other popular toy lines include Barbie and the American Girl line of dolls.

NEXT: Earnings Growth Grade »

Just this month, MAT posted second-quarter net earnings of $51.6 million, or $0.14 per share, more than doubling year-earlier earnings of $21.5 million, or $0.06 per share. The results missed analysts' estimates by just $0.01 per share. For this reason, MAT receives a C rating for this category. Mattel is on an ambitious cost-cutting campaign that allowed it to reduce costs by $12 million in the latest quarter, but the results fell short of Wall Street expectations. Selling and general expenses rose 12.2% compared with a year earlier, inflated by severance and advertising costs, but did edge down slightly as a percentage of sales. Mattel's gross margin rose by 2.9% to 48.1% of sales.

NEXT: Quantitative Grade »

Despite its average sales growth and earnings growth ratings, my stock valuation screens give Mattel Inc. a solid B Quantitative score. Remember that the Quant. score is the most powerful of my ratings variables and indicates that the short- to mid-term buying pressure on this stock is good and is improving. This year already is shaping up to be good for worldwide economic growth thanks to a growing middle class in many emerging markets. These countries have young populations with strong household formation that boost domestic consumption–especially for children's toys! MAT has a market capitalization of $7.5 billion.

NEXT: Total Grade »

My proprietary analysis of Mattel Inc. (MAT) stock results in an overall B rating. Mattel previously said customers had reacted well to its recent line of action figures based on popular World Wrestling Entertainment characters. The company warned, however, that shoppers are remaining cautious with their buying and retailers are being very prudent when ordering merchandise. Mattel, which last year celebrated the 50th anniversary of the Barbie doll, expects its Video Girl Barbie, which has an embedded video camera, to be a big hit this fall and for the holiday buying season. If you have money that you are looking to invest, Mattel should be on your list.

NEXT: Fundamental Grade »

See Full Stock Report »