Stock Story -
Hair care company Olaplex (NASDAQ:OLPX) missed Wall Street’s revenue expectations in Q3 CY2024, with sales falling 3.6% year on year to $119.1 million. The company’s full-year revenue guidance of $410 million at the midpoint came in 8.4% below analysts’ estimates. Its non-GAAP profit of $0.04 per share was also 6.8% below analysts’ consensus estimates.
Is now the time to buy Olaplex? Find out by reading the original article on StockStory, it’s free.
Olaplex (OLPX) Q3 CY2024 Highlights:
- Revenue: $119.1 million vs analyst estimates of $126.5 million (5.9% miss)
- Adjusted EPS: $0.04 vs analyst expectations of $0.04 (6.8% miss)
- EBITDA: $44.64 million vs analyst estimates of $45.09 million (1% miss)
- The company dropped its revenue guidance for the full year to $410 million at the midpoint from $449 million, a 8.7% decrease
- EBITDA guidance for the full year is $124 million at the midpoint, below analyst estimates of $150.7 million
- Gross Margin (GAAP): 70.8%, up from 69.7% in the same quarter last year
- Operating Margin: 23.5%, down from 29.7% in the same quarter last year
- EBITDA Margin: 37.5%, down from 41.7% in the same quarter last year
- Market Capitalization: $1.18 billion
Company OverviewRising to fame on TikTok because of its “bond building" hair products, Olaplex (NASDAQ:OLPX) offers products and treatments that repair the damage caused by traditional heat and chemical-based styling goods.
Personal Care
While personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering.Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.Olaplex is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale.
As you can see below, Olaplex struggled to generate demand over the last three years. Its sales dropped by 6.2% annually, showing demand was weak. This is a rough starting point for our analysis.
This quarter, Olaplex missed Wall Street’s estimates and reported a rather uninspiring 3.6% year-on-year revenue decline, generating $119.1 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 7.2% over the next 12 months, an acceleration versus the last three years. This projection is above the sector average and shows the market believes its newer products will catalyze higher growth rates.
Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.Olaplex has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging an eye-popping 39.1% over the last two years.