Financial Review: Build-A-Bear Workshop (BBW) versus Michaels Companies (MIK)

Build-A-Bear Workshop (NYSE: BBW) and Michaels Companies (NASDAQ:MIK) are both retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Volatility & Risk

Build-A-Bear Workshop has a beta of -0.35, suggesting that its stock price is 135% less volatile than the S&P 500. Comparatively, Michaels Companies has a beta of 1.24, suggesting that its stock price is 24% more volatile than the S&P 500.

Profitability

This table compares Build-A-Bear Workshop and Michaels Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Build-A-Bear Workshop 2.21% 7.91% 4.38%
Michaels Companies 7.28% -24.07% 18.67%

Institutional & Insider Ownership

75.8% of Build-A-Bear Workshop shares are held by institutional investors. 8.4% of Build-A-Bear Workshop shares are held by company insiders. Comparatively, 1.3% of Michaels Companies shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Build-A-Bear Workshop and Michaels Companies, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Build-A-Bear Workshop 0 1 1 0 2.50
Michaels Companies 1 4 6 0 2.45

Build-A-Bear Workshop presently has a consensus target price of $12.75, suggesting a potential upside of 33.51%. Michaels Companies has a consensus target price of $24.11, suggesting a potential upside of 31.83%. Given Build-A-Bear Workshop’s stronger consensus rating and higher probable upside, equities analysts clearly believe Build-A-Bear Workshop is more favorable than Michaels Companies.

Earnings and Valuation

This table compares Build-A-Bear Workshop and Michaels Companies’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Build-A-Bear Workshop $357.87 million 0.42 $7.91 million $0.53 18.02
Michaels Companies $5.36 billion 0.62 $390.49 million $2.17 8.43

Michaels Companies has higher revenue and earnings than Build-A-Bear Workshop. Michaels Companies is trading at a lower price-to-earnings ratio than Build-A-Bear Workshop, indicating that it is currently the more affordable of the two stocks.

Summary

Michaels Companies beats Build-A-Bear Workshop on 8 of the 14 factors compared between the two stocks.

About Build-A-Bear Workshop

Build-A-Bear Workshop, Inc. operates as a specialty retailer of plush animals and related products. The company operates through three segments: Direct-to-Consumer, International Franchising, and Commercial. Its merchandise comprises a range of styles of stuffed animals; clothing, shoes, and accessories for the stuffed animals; and other toy and novelty items. The company operates its stores under the Build-A-Bear Workshop brand name; and sells its products through its e-commerce sites. As of December 30, 2017, it operated 361 owned stores, including 301 stores in North America; 59 stores in Europe; and 1 store in China, as well as 102 franchised stores internationally. The company has strategic relationships with Disney, DreamWorks Animation, and Hasbro. Build-A-Bear Workshop, Inc. was founded in 1997 and is headquartered in St. Louis, Missouri.

About 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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