Olaplex: There may be a recession, but don’t let it happen to your hair too.

Here's some casual DD I did on Olaplex. Figure some people may be interested. (The discussion thread did not seem to like it because it wasn't $GOOG).

This company has some popular brands that repair your hair's bonds.

Qualitative remarks:

Visit Amazon, Ulta, or Sephora websites, and look at their hair/shampoo sections and note what the top brands are. [For Amazon you might have to explicitly go to shampoo, but hair should suffice for the latter two]. This company's products are wildly popular on TikTok and in hair salons (apparently). They saw some 3B views in their recent TikTok campaign.

I am not too worried about a recession. People care deeply about their hair, so will pay for premium products if they work. The retail versions sell for $30 while the professional ones are around $200. And hair salons like it a lot.Other luxury/cosmetic companies such as Ulta and EL have had excellent financials in the past even during tougher times. (Ulta has crushed SPY in the last decade)

I am not an expert on hair care, so I couldn't say much more about the exact use cases of OLPX. I think people who bleach or color their hair especially use it to repair the quality of their hair. Nevertheless, it's extremely popular (you can visit the hair/cosmetic subreddits to also see it discussed a lot). I also recommend asking your lady friends about it too.

Quantitative:

• Valuation: The stock has cheapened substantially from its earlier valuations, falling 70% YTD while the fundamentals only improved. Currently it trades at a 24 PE trailing and 17 PE forward. EV/EBIDTA is 14. This appears to be about the same or much cheaper than its peers (COTY, EPC, IPAR, SKIN, NTCO). Those tend to have higher PEs but about the same EV/EBITDA.

• Net income growth was 36% y.o.y. in Q1 and 77% y.o.y. in Q2 of this year.

• Revenue growth was 58% y.o.y. in Q1 and 38% y.o.y. in Q2.

• Balance Sheet: It's cash position is around 200M, compared to total long term debt of 700M.

• Cashflow: It's FCF positive, seeing between 55M to 70M each of the last 4 quarters. Annual cash flows in 2019, 2020, and 2021 where: 52.56M, 128.95M, and 199.15M. We're already at 128M for 2022, with two quarters left to go.

• The company is still small, with a market cap of 6B (it was closer to 18B earlier this year).

My Position:

35 shares at $9.55; plan to keep on adding as I just opened this position last week.