Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model
NEW YORK (
) 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 increase in net income. 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 12.7%. 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.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 0.5% when compared to the same quarter one year prior, going from $69.14 million to $69.49 million.
- Compared to its closing price of one year ago, SBH's share price has jumped by 32.73%, 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. Despite a decrease in cash flow of 15.88%, SALLY BEAUTY HOLDINGS INC is in line with the industry average cash flow growth rate of -21.27%.
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 company has a P/E ratio of 17.3, below the average specialty retail industry P/E ratio of 20.6 and below the S&P 500 P/E ratio of 17.7. Sally Beauty has a market cap of $4.34 billion and is part of the services sector and specialty retail industry. Shares are up 12.8% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff
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