Party City Holdco (PRTY) versus The Michaels Companies (MIK) Critical Analysis

Party City Holdco (NYSE: PRTY) and The Michaels Companies (NASDAQ:MIK) are both consumer discretionary companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitability, institutional ownership and valuation.

Profitability

This table compares Party City Holdco and The Michaels Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Party City Holdco 4.97% 13.97% 4.09%
The Michaels Companies 7.29% -22.53% 18.13%

Volatility & Risk

Party City Holdco has a beta of 2.66, meaning that its share price is 166% more volatile than the S&P 500. Comparatively, The Michaels Companies has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500.

Institutional & Insider Ownership

98.4% of The Michaels Companies shares are held by institutional investors. 5.0% of Party City Holdco shares are held by insiders. Comparatively, 1.5% of The Michaels Companies shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Party City Holdco and The Michaels Companies’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Party City Holdco $2.33 billion 0.67 $364.88 million $0.96 13.54
The Michaels Companies $5.21 billion 0.74 $801.02 million $1.89 11.27

The Michaels Companies has higher revenue and earnings than Party City Holdco. The Michaels Companies is trading at a lower price-to-earnings ratio than Party City Holdco, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Party City Holdco and The Michaels Companies, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Party City Holdco 0 2 2 0 2.50
The Michaels Companies 0 3 5 0 2.63

Party City Holdco currently has a consensus price target of $17.33, suggesting a potential upside of 33.33%. The Michaels Companies has a consensus price target of $24.29, suggesting a potential upside of 14.02%. Given Party City Holdco’s higher possible upside, analysts plainly believe Party City Holdco is more favorable than The Michaels Companies.

Summary

The Michaels Companies beats Party City Holdco on 9 of the 14 factors compared between the two stocks.

Party City Holdco Company Profile

Party City Holdco Inc. is a holding company with no operating assets or operations. As of December 31, 2016, the Company owned PC Nextco Holdings, LLC (PC Nextco), which owned PC Intermediate Holdings, Inc. (PC Intermediate). As of December 31, 2016, PC Intermediate owned Party City Holdings Inc. (PCHI). PCHI or its direct or indirect subsidiaries conduct all of its operating businesses. The Company operates through two segments: Retail and Wholesale. Its retail operations generate revenue primarily through the sale of its Amscan, Designware, Anagram and Costumes USA party supplies through its Party City stores, Halloween City stores and PartyCity.com. Its wholesale revenues are generated from the sale of party goods for all occasions, including paper and plastic tableware, accessories and novelties, costumes, metallic and latex balloons and stationery.

The Michaels Companies Company Profile

The Michaels Companies, Inc. (Michaels) is an arts and crafts specialty retailer in North America. The Company’s segments include Michaels-U.S., Michaels-Canada, Aaron Brothers, Pat Catan’s and Darice. As of January 28, 2017, the Company operated 1,223 Michaels retail stores in 49 states and Canada, with approximately 18,000 average square feet of selling space per store. It operated 109 Aaron Brothers stores in nine states, with approximately 5,500 average square feet of selling space and 35 Pat Catan’s stores in five states, with approximately 32,000 average square feet of selling space, as of January 28, 2017. The Company also operates an international wholesale business under the Darice brand name. The Company’s stores purchase custom frames, framing supplies and mats from its framing operation and subsidiary, Artistree, Inc. (Artistree), which consists of a manufacturing facility and four regional processing centers.

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