It’s October, and we know what that means for retailers: Christmas is less than three months away. At this time last year, there was still considerable doubt about the state of the U.S. economic recovery. But there have been a plethora of positive economic indicators in recent months, which means that this may be the first Christmas season in several years in which American consumers truly resume their free-spending ways.

What are the best plays for investors on this trend? A perennial winner is toymaker Mattel (NASDAQ: MAT).  There’s been a lot of attention paid to the latest developments in smartphones and other electronic devices. Mattel is demonstrating that traditional toys—with a few modern twists—still have a lot of appeal to kids and parents.

Mattel’s stock price has declined significantly in the last six months, due to a disappointing second-quarter earnings report. While we don’t deny that Mattel’s 2Q report left a lot to be desired, it seems the market has overreacted and the stock is now undervalued.

Another bit of negative news was that the toymaker will lose the rights to Hasbro to develop dolls based on Disney’s Princess and “Frozen” characters in 2016. “Frozen” has been one of the biggest hits in the history of kids’ movies, so this news got a lot of attention in the media.

But Mattel will still have the “Frozen” rights for another two years, at which point the fickle taste of children may have moved on to something else anyway. And even without “Frozen,” Mattel still controls some of the most well-known brands in the industry.

The company operates through three divisions: Mattel Girls & Boys brands (including Barbie, Hot Wheels and Monster High), Fisher-Price and American Girl.

Mattel’s American Girl doll lineup has continued to perform well, with sales surging 17% from a year earlier, in part because the Saige doll, which is American Girl’s Girl of the Year, has been a hit. (The company annually rolls out a new Girl of the Year doll, along with associated books, a DVD and accessories).

Sales rose 6% at the Mattel Girls & Boys segment. Barbie sales gained 3%, reversing several straight quarters of declines.

“In the second quarter, we made significant progress across a number of initiatives to better position Mattel in the second half of the year and beyond,” said Bryan G. Stockton, Mattel Chairman and Chief Executive Officer.

“For example, we completed the acquisition of MEGA Brands, reduced inventories, strengthened our management team, shifted marketing spend to the back half of the year, and exercised strong controls on SG&A expenses. And while results for the quarter did not meet our expectations, we did see improving POS trends. As we move into the second half of the year and the all-important holiday season, we need to drive POS higher by bringing innovative products to market, making additional advertising investments and optimizing the effectiveness of our marketing spend.”

The company has added a number of brands mainly aimed at preschool boys—including Barney, Bob the Builder and Thomas & Friends—when it bought HIT Entertainment for $680 million in February 2012. At the time, Thomas accounted for about three-quarters of HIT’s revenue.

“An established brand like Thomas helps Mattel, which has historically been stronger with girls than boys, in the extraordinarily competitive preschool market,” Marty Brochstein, senior vice president for industry relations and information at the International Licensing Industry Merchandisers’ Association, told the New York Times.

The company’s latest earnings report bears that out. In contrast to the strong performance of its doll lines, the Wheels segment, which consists of Hot Wheels, Matchbox and Tyco R/C products—all products mainly aimed at boys—saw its sales decline year-over-year. Sales were flat at the preschool-oriented Fisher-Price.

According to the Times, the Thomas brand has about $1 billion of sales worldwide. It appeals to both boys and girls between one and three years of age, when girls tend to move into dolls. Boys continue to follow the adventures of the little locomotive until they’re about five.

The company’s strong brands, worldwide presence and leading market share put it in a good position to gain as the global economy continues to recover. The decline of the stock price has left Mattel with a price-earnings ratio of just 13 – quite low for such a well-established company in an industry that seems likely to see increased sales over the next few quarters. A purchase of the now-undervalued Mattel stock could be your Christmas gift to yourself.

Tom Scarlett is an investment analyst at Personal Finance.