The last month hasn't been a whole lot of fun for investors in toy company Hasbro (NYSE:HAS). Shares in the maker of everything from Furby dolls to Tonka trucks to plastic Jedi Knights have fallen 15% since their mid-September high as investors dialed back their expectations for Monday's earnings report. Although the shares made an apparent jump Monday, rising nearly a dollar from their $17.80 opening price, by day's end, they were selling for just a handful of pennies more than they had fetched at Friday's close.

The sad thing is, the company didn't actually do so badly in the third quarter. Granted, according to its earnings report, released before the market opened on Monday, Hasbro fell short of analyst estimates of $0.51 in profits per diluted share. But even so, the company increased both revenues and profits over their year-ago levels. Sales were up 4%, net profits up 7%, and profits per diluted share up 9% for the quarter. Compare those results with Mattel's (NYSE:MAT) flat sales and declining profits (both net and per share) and one might have thought the Force would have been kinder to Hasbro.

The more so when you consider how well Hasbro parlayed its modest profit gains into balance sheet improvements. Over the last year, Hasbro has added $265 million to its cash hoard and paid down $386 million in long-term debt -- boosting its net cash (cash minus long-term debt) position to a healthy $324 million. Meanwhile, the company kept a lid on inventory, which grew just a hair faster than sales over the last year. Even better, Hasbro has been collecting on its debts so well that accounts receivable declined over the last 12 months.

Put it all together and I strongly suspect that, once the company gets around to filing its Form 10-Q with the Securities and Exchange Commission, we'll see that Hasbro generated strong free cash flow in Q3. In fact, while Wall Street obsesses over missed earnings estimates, the only real quibble this Fool has with Hasbro is that it didn't release a cash flow statement with its earnings release, so that we could see its free cash flow situation right away.

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Fool contributor Rich Smith holds no position in any of the companies mentioned in this article, but Hasbro is a recommendation of Motley Fool Stock Advisor , and Mattel is a Motley Fool Inside Value pick.