We recently compiled a list of the 10 Best Hair Care Stocks To Buy Now. In this article, we are going to take a look at where Sally Beauty Holdings, Inc. (NYSE:SBH) stands against the other hair care stocks.

According to Fortune Business Insights, in 2023, the hair care industry was estimated to be worth $99.52 billion globally. Between 2024 and 2032, the market is projected to expand at a CAGR of 10.4% from $106.91 billion to $213.47 billion. In 2023, Europe held a 36.43% market share, leading the hair care industry.

The demand for hair care products has increased as a result of the growing acceptance of longer hairstyles by males and the growing popularity of hair coloring. According to a survey conducted in 2020 by Garnier, 42% of 2,000 Americans discovered new techniques for dyeing their gray hair. Secondly, an increasing number of consumers are dealing with hair problems such as dandruff, graying hair, and hair loss, which will likely lead to a rise in the use of hairdressing products. According to survey results released in January 2022 by the Dermatology & Cutaneous Surgery Institute (DCSI), over two-thirds of Americans over the age of 35 experience issues with hair thinning and loss. Furthermore, the World Health Organization (WHO) released estimates showing that 30% of Japanese people were over 60 in 2020. Thirdly, there is an increasing emphasis on the development of organic and natural products to meet rising product demand. For example, Australian scalp care brand Straand made its UK debut in November 2023. To create product distinctiveness in the very competitive market, the company concentrates on creating cruelty-free and microbiome-centric products.

Specifically, as we have mentioned in our article, “20 Cheap Alternatives to Aveda Shampoo,” the global luxury hair care market was dominated by the luxury shampoo segment, which held a revenue share of approximately 30.5% in 2023.

According to a Cirana report, sales of hair products in the prestige market rose by 10% YoY in the first half of 2024, based on dollars, with styling and treatments showing the fastest rate of growth within the category. The trend of premiumization is still driving growth; three times as many hair products as lower-priced items have been added in the last three years, and these products now make up 25% of the category’s unit sales, compared with 15% just three years ago. Being the only beauty category where the bulk of sales takes place online, the premium hair market also makes for an intriguing channel tale. In fact, with double-digit growth in sales, the e-commerce channel is not slowing down at all.

One hair care product that is gaining popularity is dry shampoo. As we have stated in our article, “11 Dry Shampoo Alternatives for Every Hair Color and Type,” the dry shampoo market is expected to grow from $5.35 billion in 2023 to a valuation of $9.18 billion in 2030.

As we look ahead, Frost & Sullivan’s report reveals that the hair care market is changing due to disruptive technology like artificial intelligence, customized solutions, and innovative ingredients. The “skinification” movement places a strong emphasis on scalp health, which is driving businesses to use regenerative medicine and useful components like biotin and peptides. Personalized care is improved via IoT-enabled grooming products and AI-powered scalp analysis technologies. Companies are adopting waterless products, recyclable packaging, and a reduction in toxic chemicals as a significant priority in sustainability. Companies that want to satisfy changing customer preferences and lessen their environmental effect must promote scalp health and integrate next-generation technologies. These developments spur expansion and help brands maintain their competitiveness in a market that is changing quickly.

Benoit Butruille, Growth Expert and Principal Consultant, TechVision at Frost & Sullivan, stated:

“Hair and scalp care is booming, and it is of great interest to understand the innovations and strategies driving this growth. Technologies such as AI are being used to develop smart hair care devices. Additionally, sustainable practices are becoming increasingly important as more customers seek products made with ethically sourced, eco-friendly ingredients.”

Methodology:

We sifted through holdings of hair care ETFs and online rankings to form an initial list of 20 hair care stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)

Sally Beauty Holdings, Inc. (NYSE:SBH)

Number of Hedge Fund Investors: 24

American-based Sally Beauty Holdings, Inc. (NYSE:SBH) is a professional retailer of beauty products. Operating areas for Sally Beauty include the US, Puerto Rico, UK, Belgium, Canada, Chile, Colombia, Mexico, Peru, France, Ireland, Spain, Germany, and the Netherlands. Sally Beauty Supply and Beauty Systems Group are the two business segments that make up the company.

Providing up to 8,000 products for hair color, hair care, skincare, and nails through professional lines like Wella, Clairol, OPI, Conair, and Hot Shot Tools, as well as proprietary brands like Ion, Bong Bar, Beyond the Zone, and Silk Elements, Sally Beauty stores cater to both retail customers and salon professionals.

Up to 10,500 professionally branded products, such as Paul Mitchell, Wella, Matrix, Schwarzkopf, Kenra, Goldwell, Joico, and CHI, are sold in Beauty Systems Group stores under the CosmoProf or Armstrong McCall brands, in partnership with the company’s outside sales consultants. These products are meant to be used in salons and resold by salons to retail customers.

Exceeding the average estimate of $931.68 million, the company reported Q3 2024 revenue of $942 million, a 1.22% YoY rise. Same-store sales climbed by 1.5% YoY, propelled by strong performance in both the Sally Beauty and Beauty Systems Group (BSG) segments. CEO Denise Paulonis stated that marketing initiatives, market expansion, and digital improvements have resulted in a favorable response from consumers, which has led to an increase in the number of new and reactivated customers. Sally Beauty Holdings, Inc. (NYSE:SBH) surpassed projections by achieving an adjusted gross margin of 51% and an adjusted operating margin of 8.9% YoY.

Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 2,683,930 shares worth $28.80 million.

Overall SBH ranks 9th on our list of the best hair care stocks to buy. While we acknowledge the potential of SBH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SBH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.