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 ( TheStreet) -- Sally Beauty Holdings (NYSE: SBH) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 11.7%. 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.
- SALLY BEAUTY HOLDINGS INC reported flat earnings per share in the most recent quarter. 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 $1.14 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($1.38 versus $1.14).
- Compared to its closing price of one year ago, SBH's share price has jumped by 58.11%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- 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 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.
-- Written by a member of TheStreet Ratings Staff