Watch Out: Barbarians At The Gate For Sally Beauty Holdings (SBH)

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
By TheStreet Wire ,

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 $57.1 million.
  • SBH has traded 322,749 shares today.
  • SBH traded in a range 286.9% of the normal price range with a price range of $1.45.
  • SBH traded above its daily resistance level (quality: 21 days, meaning that the stock is crossing a resistance level set by the last 21 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., together with its subsidiaries, operates as a specialty retailer and distributor of professional beauty supplies primarily in North America, South America, and Europe. The company operates through two segments, Sally Beauty Supply and Beauty Systems Group (BSG). SBH has a PE ratio of 15. Currently there are 6 analysts that rate Sally Beauty Holdings a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Sally Beauty Holdings has been 2.2 million shares per day over the past 30 days. Sally Beauty has a market cap of $3.6 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.06 and a short float of 4.3% with 2.66 days to cover. Shares are down 28% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Sally Beauty Holdings as a

hold

. 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, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
  • SALLY BEAUTY HOLDINGS INC's earnings per share declined by 7.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SALLY BEAUTY HOLDINGS INC increased its bottom line by earning $1.51 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.51).
  • 49.73% 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 6.45% trails the industry average.
  • 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 21.63% 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 7.8% when compared to the same quarter one year ago, dropping from $67.76 million to $62.46 million.

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