The shares of The Michaels Companies, Inc. have decreased by more than -39.59% this year alone. The shares recently went down by -0.24% or -$0.02 and now trades at $8.18. The shares of Big Lots, Inc. (NYSE:BIG), has slumped by -27.73% year to date as of 11/29/2019. The shares currently trade at $20.90 and have been able to report a change of 6.58% over the past one week.
The stock of The Michaels Companies, Inc. and Big Lots, Inc. were two of the most active stocks on Friday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.
When a company is able to grow consistently in terms of earnings at a high compound rate have the highest likelihood of creating value for its shareholders over time. Analysts have predicted that MIK will grow it’s earning at a 0.80% annual rate in the next 5 years. This is in contrast to BIG which will have a positive growth at a -0.75% annual rate. This means that the higher growth rate of MIK implies a greater potential for capital appreciation over the years.
Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. MIK has an EBITDA margin of 13.54%, this implies that the underlying business of MIK is more profitable. The ROI of MIK is 43.10% while that of BIG is 13.70%. These figures suggest that MIK ventures generate a higher ROI than that of BIG.Cash Flow
The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, MIK’s free cash flow per share is a positive 0.29, while that of BIG is positive 0.97.
The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for MIK is 1.20 and that of BIG is 1.10. This implies that it is easier for MIK to cover its immediate obligations over the next 12 months than BIG.Valuation
MIK currently trades at a forward P/E of 3.33, and a P/S of 0.25 while BIG trades at a forward P/E of 5.45, a P/B of 1.26, and a P/S of 0.15. This means that looking at the earnings, book values and sales basis, MIK is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.Analyst Price Targets and Opinions
The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of MIK is currently at a -9.61% to its one-year price target of 9.05. Looking at its rival pricing, BIG is at a -21.96% relative to its price target of 26.78.
When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), MIK is given a 2.70 while 2.80 placed for BIG. This means that analysts are more bullish on the outlook for BIG stocks.Insider Activity and Investor Sentiment
Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for MIK is 7.00 while that of BIG is just 5.99. This means that analysts are more bullish on the forecast for BIG stock.
The stock of Big Lots, Inc. defeats that of The Michaels Companies, Inc. when the two are compared, with BIG taking 5 out of the total factors that were been considered. BIG happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, BIG is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for BIG is better on when it is viewed on short interest.