What Olaplex’s (OLPX) IPO Valuation and Stock Forecast Tell Investors

On Sep. 28, Olaplex Holdings (OLPX) raised the proposed deal size for its upcoming IPO. The company now plans to raise about $1.2 billion in the offering. What’s the forecast for OLPX stock, and should you buy the IPO?

Founded in 2014, Olaplex sells haircare products containing a patented repair ingredient, bis-aminopropyl diglycol dimaleate. The company was acquired by private equity company Advent International in 2019.

On Sep. 28, Olaplex filed its revised S-1 form with the SEC and raised its IPO price range.

Olaplex's IPO date isn't final yet, but it's expected to be Sep. 30.

Olaplex now plans to offer 67 million shares at $17–$19 each. Initially, the company had planned to offer shares at $14–$16. Goldman Sachs, JPMorganChase, Morgan Stanley, and Barclays are the joint lead book-running managers. The underwriters have the option to purchase an additional 10.1 million shares at the IPO price.

Olaplex products are widely used to treat damaged hair. The company develops and manufactures conditioners, shampoos, and specialty products that are used to protect, repair, and rebuild broken bonds in hair.

Olaplex's hair-repair products are in high demand as people become more concerned about their hair health and appearance. In 2020, the global haircare market was estimated to be worth $77 billion. Between 2020 to 2025, the market is expected to grow 6 percent compounded annually.

Olaplex is seeking a valuation of up to $12.3 billion in its IPO. Unlike many other companies planning IPOs, Olaplex is profitable. In the first six months of 2021, its net income rose YoY (year-over-year) to $94.9 million from a net loss of $22.4 million. Its revenue rose 90.4 percent YoY to $282.3 million in 2020, and 171.3 percent YoY to $270.2 million in the first six months of 2021.

Olaplex generated revenue of $453 million in the year ended Jun 30. Based on its pro forma market cap, Olaplex’s trailing price-to-sales multiple is 27.2x. To compare, L'Oréal S.A. stock has a next-12-month EV-to-sales multiple of 6.3x.

About 76 percent of professional hairstylists believe that Olaplex products are of better quality than other brands. In 2020, the company’s adjusted EBITDA increased YoY to $199 million from $100 million, and its professional channel distribution accounted for 55 percent of the company’s total net sales.

Sales through direct-to-consumers channels, including the company’s website and third-party e-commerce platforms, accounted for 27 percent of total net sales in 2020. While the Olaplex IPO is expensive, given the company’s revenue growth trajectory, profitability, and significant free cash flow, the offering is worth a look.

You can buy Olaplex stock after it starts trading on Sep. 30. The stock will be available on all the major brokerages, including Robinhood. All you need to do is select the ticker "OLPX" and enter the amount you would like to invest.