Why Olaplex Shares Soared This Week

Shares of the prestigious hair care company Olaplex (OLPX -1.91%) were up 16% this week as of 12:30 a.m. ET Friday, according to data from S&P Global Market Intelligence. Since reporting respectable earnings on Aug. 6, the company’s stock is up 32%.

The main catalyst behind the company’s share price rally this week appears to be related to Wednesday’s announcement that Executive Chairman John Bilbrey has bought nearly $400,000 worth of Olaplex stock. While insider purchases are relatively common for most stocks, these were the first open market purchases of Olaplex stock by an insider in over a year, which has the market bullish on the company’s recovery prospects.

Olaplex: Far from a dime

After going public with a share price of over $20 in 2021, Olaplex’s current share price of around $2.40 looks more like a penny stock than a potential value investment at first glance. In 2023 alone, sales fell by 35%, with much of that decline coming from its retail customers accumulating too much inventory (and subsequently delaying new purchases) as sales increased in the post-pandemic landscape.

Despite this alarming decline, Olaplex saw sequential sales growth in its most recent quarter, and even had four of the five top-selling prestige hair products so far in 2024, according to US-based Circana data. This leadership, along with the fact that the company generated $159 million and $48 million in free cash flow (FCF) and net income, respectively, over the past year, argues that Olaplex is not in by no means your stereotypical money stock.

Combining the company’s profitability and leadership in the prestige hair products niche with chairman Bilbrey’s recent interest in the stock, Olaplex is worth monitoring — especially when it trades at just 10 times FCF.