Sally Beauty (SBH) Stock Soars On Jana Partners Investment

Sally Beauty (SBH) stock is rising in late afternoon trading on Tuesday, after Jana Partners disclosed a new stake in the company.
By Amanda Albright ,

NEW YORK (TheStreet) -- Sally Beauty Holdings (SBH) - Get Report stock is popping by 3.64% to $24.74 on heavy trading volume on Tuesday, after Jana Partners reported a new stake in the company.

Jana, a New York City-based hedge fund known for its activist investor campaigns, reported a new stake in Sally Beauty, a retailer and distributor of beauty supplies.

The hedge fund owns 3,906,780 shares of Sally Beauty as of September 30, according to NASDAQ.com.

So far today, 4.78 million shares of Sally Beauty have traded, versus its 30-day average of 2.44 million shares. 

Separately, TheStreet Ratings team rates SALLY BEAUTY HOLDINGS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate SALLY BEAUTY HOLDINGS INC (SBH) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 49.29% is the gross profit margin for SALLY BEAUTY HOLDINGS INC which we consider to be strong. Regardless of SBH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.82% trails the industry average.
  • SALLY BEAUTY HOLDINGS INC's earnings per share declined by 7.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SALLY BEAUTY HOLDINGS INC reported lower earnings of $1.49 versus $1.51 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $1.49).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, SBH has underperformed the S&P 500 Index, declining 16.93% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Specialty Retail industry average, but is greater than that of the S&P 500. The net income has decreased by 9.0% when compared to the same quarter one year ago, dropping from $61.75 million to $56.18 million.
  • You can view the full analysis from the report here: SBH

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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