Rating Change #8
Sally Beauty Holdings Inc (SBH) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 6.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The gross profit margin for SALLY BEAUTY HOLDINGS INC is rather high; currently it is at 50.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 7.80% is above that of the industry average.
- Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.32 is very low and demonstrates very weak liquidity.
- Compared to its closing price of one year ago, SBH's share price has jumped by 57.81%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- Net operating cash flow has decreased to $58.47 million or 15.88% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.