Critical Analysis: Ollie’s Bargain Outlet Holdings (OLLI) and The Michaels Companies (MIK)

Ollie’s Bargain Outlet Holdings (NASDAQ: OLLI) and The Michaels Companies (NASDAQ:MIK) are both mid-cap consumer staples companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, risk, institutional ownership and valuation.

Volatility & Risk

Ollie’s Bargain Outlet Holdings has a beta of 0.17, indicating that its stock price is 83% less volatile than the S&P 500. Comparatively, The Michaels Companies has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Ollie’s Bargain Outlet Holdings and The Michaels Companies, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ollie’s Bargain Outlet Holdings 0 4 5 0 2.56
The Michaels Companies 0 3 5 0 2.63

Ollie’s Bargain Outlet Holdings currently has a consensus price target of $46.57, suggesting a potential upside of 3.03%. The Michaels Companies has a consensus price target of $24.29, suggesting a potential upside of 9.49%. Given The Michaels Companies’ stronger consensus rating and higher probable upside, analysts clearly believe The Michaels Companies is more favorable than Ollie’s Bargain Outlet Holdings.

Earnings and Valuation

This table compares Ollie’s Bargain Outlet Holdings and The Michaels Companies’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ollie’s Bargain Outlet Holdings $967.59 million 2.86 $127.65 million $1.15 39.30
The Michaels Companies $5.21 billion 0.77 $801.02 million $1.89 11.74

The Michaels Companies has higher revenue and earnings than Ollie’s Bargain Outlet Holdings. The Michaels Companies is trading at a lower price-to-earnings ratio than Ollie’s Bargain Outlet Holdings, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

92.9% of Ollie’s Bargain Outlet Holdings shares are held by institutional investors. Comparatively, 98.4% of The Michaels Companies shares are held by institutional investors. 22.3% of Ollie’s Bargain Outlet Holdings 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, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Ollie’s Bargain Outlet Holdings and The Michaels Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ollie’s Bargain Outlet Holdings 7.60% 10.44% 6.78%
The Michaels Companies 7.29% -22.53% 18.13%

Summary

The Michaels Companies beats Ollie’s Bargain Outlet Holdings on 8 of the 13 factors compared between the two stocks.

About Ollie’s Bargain Outlet Holdings

Ollie’s Bargain Outlet Holdings, Inc. is a retailer of brand name merchandise. The Company offers customers a selection of brand name products, including food, housewares, books and stationery, bed and bath, floor coverings, electronics and toys. Its warehouse format stores feature a range of products, including hardware, personal healthcare, candy, clothing, sporting goods, pet and lawn and garden products. It offers cooking utensils, dishes, appliances, plastic containers, coffee, bottled non-carbonated beverages, coffee, bottled non-carbonated beverages, bedding, towels, curtains, laminate flooring, commercial and residential carpeting, air conditioners, home electronics, cellular accessories, dolls, action figures, puzzles, action figures, puzzles, educational toys, board games, luggage, automotive, seasonal, furniture, summer furniture and lawn and garden. As of January 28, 2017, it had operated 234 stores across 19 contiguous states in the Eastern half of the United States.

About The Michaels Companies

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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