Olaplex Options Show Unusual Volume, Implying Contrarian Opportunity Brewing

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Olaplex stock may rise on an attractive valuation profile

Despite inflationary pressures broadly affecting consumer sentiment, the beauty care segment enjoyed a resilient performance in 2022, potentially setting up a possible recovery for hair care specialist Olaplex Holdings (NASDAQ:OLPX).

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According to data from The NPD Group, the U.S. prestige beauty industry saw revenue grow 15% year-over-year to $27.1 billion in 2022. Fundamentally, the backdrop provides a tailwind for OLPX stock after suffering sharp losses in the trailing-year period.

Notably, Fox Business reported in August last year that strong demand for beauty products sparked a competitive drive for market share. Encouragingly, Ulta Beauty (NASDAQ:ULTA) CEO David Kimbell stated at the time that the company did not see evidence of customers trading down to cheaper alternatives.

“We're seeing strong growth across all aspects of our business,” Kimbell said during a conference call for Ulta’s second-quarter earnings result. “Every category performed in double digits, strength across channels, stores, e-comm services. And, as we look at income levels of our guests, we're seeing healthy growth at all income levels.”

Office Returns

Interestingly, Fox Business also pointed out that the increased demand in the beauty care sector materialized as Americans headed back to the office. Over the past several months, high-profile enterprises such as Tesla (NASDAQ:TSLA) implemented return-to-office directives.

Options traders appear to be taking the hint, potentially preparing for big moves ahead. Following the close of the March 27 session, OLPX stock represented one of the highlights of Fintel’s screener for unusual stock options volume. Specifically, call volume hit 13,500 contracts against put volume of 55 contracts. Typically, OLPX sees average call volume of 327 contracts and average put volume of 191.


Undervalued Opportunity

Significantly, the present put/call ratio for OLPX stock sits at 0.43. As noted on the screener page, since puts are generally a bearish bet and calls are a bullish bet, put/call ratios greater than 1 indicate a bearish sentiment, and ratios less than one indicate a bullish sentiment.

Moreover, OLPX stock represents an undervalued opportunity relative to the broader specialty retail category. At time of writing, Olaplex shares feature a trailing-12-month (TTM) earnings multiple of 10.74. In contrast, the underlying sector’s price-earnings ratio on a TTM basis stands at 19.97x.

Also, Fintel’s proprietary scoring model rates the value proposition of OLPX stock as 75.33 points. This ranks as 5,831 out of 22,582 covered securities. As well, Fintel notes that Olaplex’s quality score stands at 72.69 points. This tally ranks as 7,075 out of 11,546 covered securities.

Article by Joshua Enomoto, Fintel