Olaplex Stock To $1?

Olaplex (OLPX) stock has jumped 51% during the past day, and is currently trading at $2.01. Our multi-factor assessment suggests that it may be time to sell OLPX stock. We have, overall, a pessimistic view of the stock, and a price of $1 may not be out of reach. We believe there are several things to fear in OLPX stock given its overall weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s moderate valuation which is why we think it is unattractive.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $1.3 Bil in market cap, Olaplex provides hair care shampoos and conditioners for treatment, maintenance, and protection, serving professional salons, retailers, and consumers.

[1] Valuation Looks Moderate

This table highlights how OLPX is valued vs broader market. For more details see: OLPX Valuation Ratios

[2] Growth Is Inconsistent

• Olaplex has seen its top line shrink at an average rate of -14.2% over the last 3 years
• Its revenues have grown 0.07% from $423 Mil to $423 Mil in the last 12 months
• Also, its quarterly revenues grew 4.3% to $105 Mil in the most recent quarter from $101 Mil a year ago.

This table highlights how OLPX is growing vs broader market. For more details see: OLPX Revenue Comparison

[3] Profitability Appears Very Weak

• OLPX last 12 month operating income was $19 Mil representing operating margin of 4.5%
• With cash flow margin of 13.9%, it generated nearly $59 Mil in operating cash flow over this period
• For the same period, OLPX generated nearly $-9.3 Mil in net income, suggesting net margin of about -2.2%

This table highlights how OLPX profitability vs broader market. For more details see: OLPX Operating Income Comparison

[4] Financial Stability Looks Strong

• OLPX Debt was $352 Mil at the end of the most recent quarter, while its current Market Cap is $1.3 Bil. This implies Debt-to-Equity Ratio of 26.2%
• OLPX Cash (including cash equivalents) makes up $319 Mil of $1.5 Bil in total Assets. This yields a Cash-to-Assets Ratio of 21.3%

[5] Downturn Resilience Is Very Weak

OLPX has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• OLPX stock fell 95.4% from a high of $29.41 on 3 January 2022 to $1.36 on 1 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $2.62 on 18 September 2024 , and currently trades at $2.01

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read OLPX Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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