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Barbarian At The Gate: Sally Beauty Holdings (SBH)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Sally Beauty Holdings (SBH) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sally Beauty Holdings as such a stock due to the following factors:

  • SBH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.8 million.
  • SBH has traded 1.7 million shares today.
  • SBH traded in a range 237.6% of the normal price range with a price range of $1.01.
  • SBH traded above its daily resistance level (quality: 48 days, meaning that the stock is crossing a resistance level set by the last 48 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on SBH:

Sally Beauty Holdings, Inc., through its subsidiaries, engages in the distribution and retail of professional beauty supplies primarily in North America, South America, and Europe. The company operates in two segments, Sally Beauty Supply and Beauty Systems Group. The stock currently has a dividend yield of 5.6%. SBH has a PE ratio of 17.8. Currently there are 4 analysts that rate Sally Beauty Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Sally Beauty Holdings has been 1.5 million shares per day over the past 30 days. Sally Beauty has a market cap of $4.3 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.60 and a short float of 4% with 4.10 days to cover. Shares are up 10% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sally Beauty Holdings as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, expanding profit margins, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • SALLY BEAUTY HOLDINGS INC has improved earnings per share by 13.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SALLY BEAUTY HOLDINGS INC increased its bottom line by earning $1.23 versus $1.14 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus $1.23).
  • SBH's revenue growth trails the industry average of 20.0%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for SALLY BEAUTY HOLDINGS INC is rather high; currently it is at 50.11%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 7.94% is above that of the industry average.
  • Net operating cash flow has slightly increased to $60.96 million or 4.25% when compared to the same quarter last year. Despite an increase in cash flow, SALLY BEAUTY HOLDINGS INC's cash flow growth rate is still lower than the industry average growth rate of 29.39%.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income increased by 4.3% when compared to the same quarter one year prior, going from $69.49 million to $72.47 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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