Unusual Options Point to Possibly Sustained Gains for The Beauty Health Company (SKIN)

While skincare specialist The Beauty Health Company (SKIN) might not garner the attention of in-demand categories such as artificial intelligence, this dynamic could soon change. Since the start of the year, SKIN stock jumped a blistering 36.77%. In contrast, the benchmark S&P 500 index is up less than 4% during the same period. What’s more, it’s quite possible that SKIN has the legs to jump even higher.

Operationally, the beauty care specialist continues firing on all cylinders. Just recently, the enterprise posted a strong earnings report for its fourth quarter, delivering a print that beat analysts’ expectations for both the top and bottom lines. As a result, SKIN stock jumped over 11% on the Tuesday session.

Specifically, the Motley Fool noted that “[r]evenue in the fourth quarter rose 26% to $98.1 million, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $16.3 million for the fourth quarter, or $0.05 per share, a 92% increase compared to the year-ago period. Wall Street had been looking for $94.6 million in revenue and $0.04 per share in profits.”

In Q4 2021, Beauty Health rang up $77.9 million in sales on a net loss of $17.3 million. In the most recent quarter, the company managed to deliver net income of $3.8 million.

Adding to the broader enthusiasm, Beauty Health announced that it would make an acquisition (for an undisclosed amount) of SkinStylus, a manufacturer of a microneedling device approved by the Food and Drug Administration. Per Motley Fool, Beauty Health describes the device – called Hydrafacial – as “a patented vortex-fusion delivery system to cleanse, extract, and hydrate the skin with proprietary solutions and serums.”

Moving forward, SKIN stock may continue lighting up the market in an emerald hue due to the following three reasons.

Options Traders Dig SKIN Stock

Following the close of the Feb. 28 session, SKIN stock represented one of the highlights of Barchart.com’s screener for unusual stock options volume. Specifically, total volume came out to 4,751 contracts against an open interest reading of 29,825. The delta between the Tuesday session volume and the trailing one-month average volume came out to 178.49%.

Drilling into the details, call volume hit 4,528 contracts against put volume that reached only 223. Therefore, the put/call volume ratio sat at 0.05, mathematically favoring the bulls.

To be sure, following the implications of unusual stock options volume doesn’t guarantee trading success. As well, SKIN stock represents a higher-risk, higher-reward venture. While it’s a star performer so far in 2023, in the trailing 365 days, SKIN plunged 34%. Not surprisingly, the stock’s 60-month beta stands at 1.21, indicating higher-than-average volatility.

Still, in the trailing five years, SKIN stock gained 23.5% of equity value. From a technical analysis perspective, shares may be building a baseline of support before rocketing higher. Interestingly, the Barchart Technical Opinion index rates SKIN a 40% buy, noting a strengthening short-term outlook.

Normalization Trends Benefit Beauty Health

While the nine-to-five worker bees might be indignant about it, employers will likely recall their staff back to the office. Fundamentally, a lack of trust exists between management and the rank and file. For instance, one study states that 31% of workers waste at least one hour at work every day. And in 2019, the American Management Association revealed that the average worker wastes 2.09 hours per day.

Like it or not, accountability is next to impossible for white-collar positions with vague mechanisms for measuring productivity. In the name of fairness, companies could axe remote-work privileges altogether.

Although perhaps a disheartening proposition for most, such a backdrop is a boon for SKIN stock. With a greater incentive for looking presentable, demand for its various skincare solutions should rise.

In addition, COVID-19 fears have largely faded away. With high-socialization practices such as traveling and dating returning to pre-pandemic norms, SKIN stock may swing higher on increased relevancies.

The Numbers Bode Well for SKIN

As stated earlier, Beauty Health’s operational profile represents one of its greatest strengths. For instance, the company’s three-year revenue growth rate stands at 41.7%, outpacing 95.53% of competitors in the consumer-packaged goods industry. Also, its net margin pings at 6.73%, beating out nearly 70% of its rivals.

To be fair, not everything about SKIN stock is so encouraging. Objectively, the market prices SKIN at a forward multiple of 66.3, worse than nearly 98% of sector peers. Also, its price-to-sales ratio stands at 5.48 times, worse than almost 89% of the field.

However, analysts are willing to be patient with the opportunity. According to Barchart, SKIN stock benefits from a consensus strong buy view. Further, the average price target among covering analysts in the past three months stands at $15.50. This implies 23% upside potential, making it well worth consideration.

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