3 Reasons SBH is Risky and 1 Stock to Buy Instead

Sally Beauty has had an impressive run over the past six months as its shares have beaten the S&P 500 by 14.6%. The stock now trades at $16.32, marking a 20.8% gain. This run-up might have investors contemplating their next move.

Is now the time to buy Sally Beauty, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Do We Think Sally Beauty Will Underperform?

We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are three reasons you should be careful with SBH and a stock we'd rather own.

1. Lack of New Stores, a Headwind for Revenue

A retailer’s store count often determines how much revenue it can generate.

Sally Beauty operated 4,415 locations in the latest quarter, and over the last two years, has kept its store count flat while other consumer retail businesses have opted for growth.

When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.

2. Flat Same-Store Sales Indicate Weak Demand

Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Sally Beauty’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat.

3. Fewer Distribution Channels Limit its Ceiling

With $3.71 billion in revenue over the past 12 months, Sally Beauty is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.

Final Judgment

We see the value of companies helping consumers, but in the case of Sally Beauty, we’re out. With its shares outperforming the market lately, the stock trades at 7.4× forward P/E (or $16.32 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. Let us point you toward the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of Sally Beauty

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.