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Sally Beauty Holdings, Inc. (SBH) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Sally Beauty Holdings, Inc. (SBH)

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Intrinsic Value (DCF)

Current$15.89
→
Intrinsic$24.61
+55%
$12.48$24.61$47.67
Market implies 7% growth for 5 years
DCF analysis suggests SBH could have 55% upside at 14% growth — verify assumptions match your view.
At $16, the market prices in only 7% growth — below historical 14%, suggesting low expectations.
Range: Bear $12 → Bull $48. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →10%12%14%16%
8%$32$36$41$45
10%$19$22$25$28
12%$11$14$16$18
14%$7$8$10$12

Bull Case

  • Bull case ($48) offers 200% upside at 17% growth, 9% discount
  • 35% margin of safety vs. base case estimate
  • Market-implied growth (7%) ≤ historical CAGR (14%)

Bear Case

  • Bear case ($12) implies 21% downside at 11% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$196.53M
Year 2$223.66M
Year 3$254.54M
Year 4$289.68M
Year 5$329.67M
Terminal$4.85B

📐 Model Inputs

Growth Rate13.8%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$172.69MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is SBH stock undervalued or overvalued?
🟢 UNDERVALUED

SBH trades at $15.89 vs. our DCF-derived intrinsic value of $24.61, implying +62% upside. At a 10.0% WACC and 13.8% projected FCF growth, the market appears to be underpricing the present value of SBH's future cash flows. The bear case ($12.73) still suggests upside, providing margin of safety.

What is SBH's intrinsic value?

Using a 5-year DCF model: Base FCF of $173M, projected at 13.8% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $1.41B net debt and dividing by 0.10B shares: Bear $12.73 | Base $24.61 | Bull $41.33. Current price $15.89 implies +62% to base case.

How is SBH's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 13.8% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($3.97B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 23.0x.