Sally Beauty Holdings, Inc. (NYSE:SBH), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$13.80 at one point, and dropping to the lows of US$10.31. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Sally Beauty Holdings' current trading price of US$11.10 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Sally Beauty Holdings's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Sally Beauty Holdings?
Good news, investors! Sally Beauty Holdings is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Sally Beauty Holdings's ratio of 6.74x is below its peer average of 15.57x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. Although, there may be another chance to buy again in the future. This is because Sally Beauty Holdings's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Sally Beauty Holdings look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Sally Beauty Holdings' earnings over the next few years are expected to increase by 27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since SBH is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on SBH for a while, now might be the time to make a leap. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy SBH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you want to dive deeper into Sally Beauty Holdings, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Sally Beauty Holdings and you'll want to know about it.
If you are no longer interested in Sally Beauty Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.