Sally Beauty Q4 Earnings: Is NYSE:SBH Cheap at 7.9x Forward P/E?

in EARNINGS/INVESTING IDEAS by

Sally Beauty Holdings, Inc. (NYSE:SBH) is scheduled to report Q4 earnings results before markets open for trading on November 12, 2020.

The company is expected to report earnings of $0.56/share on revenue of $985.8 million. The consensus earnings per share (EPS) of $0.56/share is based on a poll of 9 analysts and represents a decline in eps of −3.6% over the same quarter last year, when the company reported earnings of $0.58/share.

The revenue forecast of $985.8 million based on a poll of 8 analysts implies a year-over-year (YoY) growth in revenue of 2.1%. Last year the company reported $965.9 million in revenue for the quarter.

Expected to report EPS contraction of −3.6% for Q4, 2020
Metric Expected Prior Year YoY Change
Revenue $985.85 $965.94 2.1%
EPS $0.56 $0.58 −3.6%

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, and missed expectations 3 quarters.

What are your expectations from Sally Beauty Holdings, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q3, 2020 -$0.01 -$0.11 -877.8% Missed
Q2, 2020 $0.22 $0.23 4.0% Beat
Q1, 2020 $0.56 $0.47 −16.4% Missed
Q4, 2019 $0.53 $0.58 9.2% Beat
Q3, 2019 $0.58 $0.60 4.2% Beat
Q2, 2019 $0.54 $0.51 −5.4% Missed
Q1, 2019 $0.53 $0.57 7.7% Beat
Q4, 2018 $0.48 $0.51 6.9% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −12.8%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 30, 2020 $13.32 $11.61 −12.8% Decline
May 6, 2020 $9.66 $9.92 2.7% Increase
February 6, 2020 $15.98 $13.20 −17.4% Decline
November 7, 2019 $16.64 $19.90 19.6% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.98, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.98 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Sally Beauty Holdings, Inc. is currently trading at $10.30/share, up 10.8% for the day. The company is trading at approximately 49.2% of its 52-week high of $20.73/share. The company’s stock price is down −11.3% since the last earnings report and up 16.5% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 54.01 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:SBH Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 10.21 and a forward P/E multiple of 7.91.

Sally Beauty Holdings, Inc.’s current share price also implies a price-to-book (P/B) multiple of −16.55. The following table summarizes some other key fundamental ratios:

Data as of November 9, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q3
Period End Date June 30, 2020
Stock Price (Current) $10.30
P/E Ratio 10.2x
P/E Ratio (Fwd) 7.9x
PEG Ratio −0.2
Total Debt / Total Capital 72.6%
Levered Free Cash Flow $260.2 million
EV / EBITDA 8.2x

Finbox

Sally Beauty Holdings, Inc. is a small-cap stock with a market capitalization of $1.044 billion and a total enterprise value of $2.977 billion. The company operates in the Consumer Discretionary sector and the Specialty Retail industry.

Sally Beauty Holdings, Inc. operates as a specialty retailer and distributor of professional beauty supplies. The company operates through two segments, Sally Beauty Supply and Beauty Systems Group. The Sally Beauty Supply segment offers beauty products, including hair color and care, skin and nail care, styling tools, and other beauty products for retail customers and salon professionals. This segment also provides products under third-party brands, such as Wella, Clairol, OPI, Conair, and Hot Shot Tools, as well as exclusive-label brand merchandise. The Beauty Systems Group segment offers professional beauty products, such as hair color and care, skin and nail care, styling tools, and other beauty items directly to salons and salon professionals through its professional-only stores, e-commerce Websites, and sales force, as well as through franchised stores under the Armstrong McCall store names. This segment also sells products under third-party brands, such as Paul Mitchell, Wella, Matrix, Schwarzkopf, Kenra, Goldwell, Joico, and Chi. As of November 18, 2019, the company operated 5,061 stores, including 159 franchised units in the United States, Puerto Rico, Canada, Mexico, Chile, Peru, the United Kingdom, Ireland, Belgium, France, the Netherlands, Spain, and Germany. It also distributes its products through full-service/exclusive distributors, open-line distributors, direct sales, and mega-salon stores. Sally Beauty Holdings, Inc. was founded in 1964 and is headquartered in Denton, Texas.

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