Sally Beauty Is Cheap With A Catalyst; Raymond James Upgrades

In a report published Monday, analysts at Raymond James upgraded

from Market Perform to Outperform. The price target was set to $35. The analysts believe that the stock is undervalued at its current levels. "[W]e are optimistic that the growth initiatives recently instituted by new CEO Chris Brickman and his team will ultimately bear fruit, particularly in the Sally segment, thus also driving operating leverage," the analysts said. The growth initiatives include a new nail studio, ongoing store refresh and a new CRM system. These initiatives are still to be fully realized. According to Raymond James, "Valuing SBH is not a very straightforward exercise, complicated by the fact that the company is really two distinct businesses operating under one roof… Based on this, our base case yielded potential upside for the shares of 9 percent, while our bull case yielded potential upside of 21 percent." The analysts expect the company to deliver 8 percent EPS growth in 2015 and 14 percent in 2016.