Party City Holdco Inc.’s (NYSE:PRTY) released its most recent earnings update in December 2018, which confirmed that the business faced a immense headwind with earnings falling by -43%. Below is a brief commentary on my key takeaways on how market analysts perceive Party City Holdco’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for next year seems positive, with earnings growing by a robust 20%. This growth seems to continue into the following year with rates arriving at double digit 36% compared to today’s earnings, and finally hitting US$183m by 2022.
Even though it is helpful to understand the growth rate year by year relative to today’s level, it may be more valuable analyzing the rate at which the company is rising or falling every year, on average. The benefit of this technique is that it ignores near term flucuations and accounts for the overarching direction of Party City Holdco’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 13%. This means, we can presume Party City Holdco will grow its earnings by 13% every year for the next couple of years.
For Party City Holdco, I’ve put together three pertinent factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is PRTY worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PRTY is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PRTY? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.