Sally Beauty Holdings

SBH

Specialty Retail · Consumer Cyclical

Price

$14.88

-0.28 (-1.85%)

Market Cap

$1.42B

Winston Score

Winston is serious

Mixed quality — meaningful strengths and weaknesses.

Share count falling — buybacks

−9.1% over 4y

The company has reduced its share count over this period, returning value to shareholders through buybacks.

Diluted shares outstanding: 114.2M (2021) → 103.8M (2025)

Sally Beauty Holdings sells hair color, hair care, nail products, and salon supplies. It serves two main customer groups: everyday shoppers who want professional-grade beauty products at home, and licensed salon professionals who need supplies for their businesses. The company operates two retail chains — Sally Beauty Supply and Beauty Systems Group — making it one of the largest specialty retailers of professional beauty products in the world.

Sally Beauty makes money by selling products directly in its stores and online. It operates roughly 4,600 stores across the United States, Canada, Mexico, and parts of Europe. Its main competitive advantage is access to professional-grade brands that are not typically sold in drugstores or mass-market retailers. However, the company faces real pressure from e-commerce competitors and direct-to-consumer beauty brands that are increasingly selling professional products online without needing a middleman, which could erode Sally Beauty's core reason for existing.

Winston Score History

Score breakdown

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Quality

Gross Margin

52.6%

Healthy — 52.6% gross margin

Operating Margin

8.0%

Modest — 8.0% operating margin

ROCE

4.0%

Weak — 4.0% return on capital

ROIC between 0% and 5%. They earn a few cents back per dollar invested in the business.

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Growth

Sales YoY

-1.7%

Shrinking sales (-1.7% YoY)

EPS YoY

+13.2%

Earnings growing (13.2% YoY)

Healthy double-digit earnings growth — what compounders look like.

EPS Consistency

6/8 quarters

Earnings grew in most of the last 8 quarters

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Cash Flow

Cash Conversion

197%

Turns 197% of profit into real cash

FCF Margin

6.5%

Modest free cash flow (6.5%)

FCF margin between 0% and 10%. Some cash from sales, but not a lot.

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Stability

Debt / Equity

1.17

Elevated debt (1.17)

Interest Cover

4.91x

Adequate interest coverage (4.9x)

Interest coverage between 3 and 8. Profits cover interest several times over.

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Valuation

P/E Ratio (TTM)

8.3x

Attractive valuation — P/E 8.3

P/E under 10. The price tag is small relative to last year's profit.

P/E vs Forward

+1.4

GROWING

Earnings expected to grow — slightly cheaper on forward P/E

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Dividends

Not applicable for this business.

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