Party City Holdco Inc. (NYSE:PRTY) shares are down more than -37.98% this year and recently decreased -3.13% or -$0.2 to settle at $6.19. Investors Bancorp, Inc. (NASDAQ:ISBC), on the other hand, is up 9.90% year to date as of 09/12/2019. It currently trades at $11.43 and has returned 3.07% during the past week.
Party City Holdco Inc. (NYSE:PRTY) and Investors Bancorp, Inc. (NASDAQ:ISBC) are the two most active stocks in the Specialty Retail, Other industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect PRTY to grow earnings at a 9.40% annual rate over the next 5 years. Comparatively, ISBC is expected to grow at a 10.38% annual rate. All else equal, ISBC’s higher growth rate would imply a greater potential for capital appreciation.
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return., compared to an EBITDA margin of 93.97% for Investors Bancorp, Inc. (ISBC). PRTY’s ROI is 8.00% while ISBC has a ROI of 18.30%. The interpretation is that ISBC’s business generates a higher return on investment than PRTY’s.Cash Flow
Cash is king when it comes to investing. PRTY’s free cash flow (“FCF”) per share for the trailing twelve months was -0.26. Comparatively, ISBC’s free cash flow per share was +0.02. On a percent-of-sales basis, PRTY’s free cash flow was -1.01% while ISBC converted 0% of its revenues into cash flow. This means that, for a given level of sales, ISBC is able to generate more free cash flow for investors.
PRTY’s debt-to-equity ratio is 1.83 versus a D/E of 0.00 for ISBC. PRTY is therefore the more solvent of the two companies, and has lower financial risk.
PRTY trades at a forward P/E of 3.80, a P/B of 0.54, and a P/S of 0.24, compared to a forward P/E of 15.08, a P/B of 1.03, and a P/S of 3.10 for ISBC. PRTY is the cheaper of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. PRTY is currently priced at a -34.84% to its one-year price target of 9.50. Comparatively, ISBC is -10.35% relative to its price target of 12.75. This suggests that PRTY is the better investment over the next year.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. PRTY has a beta of 1.38 and ISBC’s beta is 0.92. ISBC’s shares are therefore the less volatile of the two stocks.Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. PRTY has a short ratio of 10.80 compared to a short interest of 2.71 for ISBC. This implies that the market is currently less bearish on the outlook for ISBC.
Investors Bancorp, Inc. (NASDAQ:ISBC) beats Party City Holdco Inc. (NYSE:PRTY) on a total of 9 of the 14 factors compared between the two stocks. ISBC higher liquidity, is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, PRTY is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, ISBC has better sentiment signals based on short interest.