Party City Holdco Inc. (PRTY) designs, manufactures, sources, and distributes party goods worldwide. The company operates through two segments, Retail and Wholesale. It offers paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts, and stationery.

PRTY’s $0.10 EPS in the second quarter surpassed the consensus estimate by 66.7%. However, the company’s revenue of $527.45 million came in marginally lower than the $529.40 million estimate.

PRTY’s stock has declined 63.9% in price year-to-date and 68.7% over the past year to close the last trading session at $2.01. It is currently trading 78.1% below its 52-week high of $9.21, which it hit on November 5, 2021.

Here’s what could influence the performance of PRTY in the upcoming months:

Disappointing Financials

PRTY’s net sales declined 1.5% year-over-year to $527.45 million for the second quarter ended June 30, 2022. Its adjusted EBITDA declined 46.6% year-over-year to $45.80 million. The company’s adjusted net income decreased 66.2% year-over-year to $11.50 million. Also, its adjusted EPS declined 65.5% year-over-year.

Mixed Analyst Estimates

PRTY’s EPS and revenue for fiscal 2022 are expected to decline 88.2% and 0.7% year-over-year to $0.08 and $2.16 billion, respectively. Its EPS and revenue for fiscal 2023 are expected to increase 425% and 2.7% year-over-year to $0.42 and $2.21 billion, respectively.

Mixed Profitability

In terms of trailing-12-month gross profit margin, PRTY’s 15.56% is 57.6% lower than the 36.70% industry average. Likewise, its 0.74% trailing-12-month asset turnover ratio is 28% lower than the industry average of 1.03%.

However, the stock’s trailing-12-month ROCE and Capex/Sales of 68.80% and 4.14% compare to the industry averages of 15.51% and 2.92%, respectively.

Mixed Valuation

In terms of forward P/B, PRTY’s 0.48x is 82.1% lower than the 2.68x industry average. Likewise, its 0.11x forward P/S is 88.7% lower than the 0.93x industry average.

However, the stock’s 1.19x forward EV/S is 1% higher than the 1.18x industry average. Also, its 14.64x forward EV/EBITDA is 62.2% higher than the 9.02x industry average.

POWR Ratings Reflect Bleak Prospects

PRTY has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PRTY has an F grade for Stability, in sync with its 3.12 beta.

It has a C grade for Quality, consistent with its mixed profitability.

PRTY is ranked #37 out of 46 stocks in the Specialty Retailers industry. Click here to access PRTY’s ratings for Growth, Value, Momentum, and Sentiment.

Bottom Line

Despite surpassing the consensus earnings estimate in the last reported quarter, PRTY is best avoided now, given its weak fundamentals and growth prospects.

How Does Party City Holdco Inc. (PRTY) Stack Up Against Its Peers?

PRTY has an overall POWR Rating of D, equating to a Sell. Therefore, one might want to consider investing in other Specialty Retailers stocks with an A (Strong Buy) or B (Buy) rating, such as TravelCenters of America Inc. (TA), Murphy USA Inc. (MUSA), and The ODP Corporation (ODP).

PRTY shares were trading at $2.05 per share on Wednesday morning, up $0.04 (+1.99%). Year-to-date, PRTY has declined -63.20%, versus a -12.10% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

More...