Watch Out: Barbarians At The Gate For 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 $22.5 million.
  • SBH has traded 396,447 shares today.
  • SBH traded in a range 209.2% of the normal price range with a price range of $1.09.
  • SBH traded above its daily resistance level (quality: 307 days, meaning that the stock is crossing a resistance level set by the last 307 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 20.3. Currently there are 7 analysts that rate Sally Beauty Holdings a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Sally Beauty Holdings has been 980,100 shares per day over the past 30 days. Sally Beauty has a market cap of $4.8 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.90 and a short float of 4.1% with 8.37 days to cover. Shares are up 1.6% year-to-date as of the close of trading on Tuesday.

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 revenue growth, good cash flow from operations, growth in earnings per share, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $122.51 million or 8.10% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.01%.
  • SALLY BEAUTY HOLDINGS INC's earnings per share improvement from the most recent quarter was slightly positive. 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 $1.51 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.51).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 49.51% 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 6.53% trails the industry average.

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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