Markets
SBH

What Makes Sally Beauty (SBH) a Strong Momentum Stock: Buy Now?

A pen and a calculator.
Credit: Shutterstock photo

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores , helps address this issue for us.

Below, we take a look at Sally Beauty (SBH) , which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Sally Beauty currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here >>>

Set to Beat the Market?

In order to see if SBH is a promising momentum pick, let's examine some Momentum Style elements to see if this beauty products seller holds up.

Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For SBH, shares are up 17.38% over the past week while the Zacks Retail - Miscellaneous industry is flat over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 16.82% compares favorably with the industry's 6.5% performance as well.

While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Over the past quarter, shares of Sally Beauty have risen 44.77%, and are up 42.67% in the last year. In comparison, the S&P 500 has only moved -3.26% and 7.61%, respectively.

Investors should also take note of SBH's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, SBH is averaging 2,845,408 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with SBH.

Over the past two months, 7 earnings estimates moved higher compared to 1 lower for the full year. These revisions helped boost SBH's consensus estimate, increasing from $2.10 to $2.20 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been 1 downward revision in the same time period.

Bottom Line

Taking into account all of these elements, it should come as no surprise that SBH is a #2 (Buy) stock with a Momentum Score of A. If you've been searching for a fresh pick that's set to rise in the near-term, make sure to keep Sally Beauty on your short list.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Sally Beauty Holdings, Inc. (SBH): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SBH

Other Topics

Investing Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More