Back to top

Aggressive Growth

Sally Beauty Holdings, Inc. (SBH - Snapshot Report) recently posted its fifth consecutive earnings surprise, thanks to strong same-store-sales growth.

Analysts moved estimates higher, keeping valuations in check and giving SBH a Zacks #1 Rank (Strong Buy).

Company Description

Sally Beauty is a beauty retailer with over 4,000 stores, in addition to outside sales consultants, in North America and Europe.

Earnings Jump 43%

On May 5 Sally Beauty released quarterly results that showed an 11% rise in net sales, to $802 million. Same store sales were up 6% and the rest was attributed to new stores and acquisition activity.

Margins were expanding during the period as well, pushing net income 43% higher, to $49.3 million. That works out to $0.26 per share, up from $0.19 a year ago. The Zacks Consensus Estimate was calling for $0.23, giving Sally Beauty its fifth consecutive earnings surprise.

Higher Growth Rates

Analysts raised the bar for Sally Beauty after the earnings surprise, unanimously raising full-year estimates. The Zacks Consensus for fiscal 2011 rose 4 cents, to $1.01, which is 31% higher than last year.

Next year's average forecast is also up 4 cents, to $1.17, which puts the expected growth rate at 16%.

Valuation Picture

Share of SBH jumped on the news, but those higher estimates have kept valuations in check. The forward P/E is about 15 times and, with a 5-year growth rate of 12%, the PEG ratio is 1.3. That doesn't scream value, but shows a reasonable price.

Given that they are more than half way through the fiscal year, you could use the 2012 estimates, which give a P/E near 13 times and PEG of 1.1, a bit more attractive.

Slow and Steady

The estimate outlook for SBH has not been dramatic over the past few years. But, as they say, slow and steady wins the race. Take a look at the consistent year-over-year improvements and the slight increases throughout the year. That is exactly what you want to see for long-term growth from a company.

Sally Beauty - ticker SBH>


Bill Wilton is the Aggressive Growth Stock Strategist for He is also the Editor in charge of the Zacks Small Cap Trader service

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.80 +7.04%
TRAVELCENTE… TA 11.84 +6.38%
BANCO DO BR… BDORY 14.74 +5.66%
AIR INDUSTR… AIRI 9.99 +4.15%
EQT MIDSTRM… EQM 98.14 +3.38%