Shares of beauty company Oddity Tech (ODD 1.08%) stock gained 10% in May, according to data provided by S&P Global Market Intelligence. It reported another solid round of earnings, and investors are excited about its potential.
AI for a more beautiful you
Oddity distinguishes itself in the large beauty industry through its focus on digital operations and technology driven by artificial intelligence (AI). It operates two websites, Il Makiage for cosmetics and SpoiledChild for skincare, both underpinned by troves of data and machine learning.
Oddity also recently acquired a skincare lab that it rebranded as Oddity Labs to develop cutting-edge skincare for its customers. It says it can pinpoint a customer's needs through a specialized app that uses AI to accurately determine color and type through an image, and customers can get the right recommendations without leaving home.
The company also has a unique social media aspect to its platform. It works with influencers who post video tutorials of its products on its site through its social media platform, creating fresh daily content to keep customers coming back.
This looks like a concept that's catching on. Oddity went public last July with high revenue growth and increasing profits. That trend has only continued over the past few quarters. In the 2024 first quarter, revenue increased 28% to $212 million. Net income increased 68% to $33 million, and Oddity generated $79 million in free cash flow.
Management is gearing up for more. Based on the first-quarter results, it raised its full-year outlook across the board. Oddity is also in the process of developing more brands for its portfolio built along the same lines as its current brands but targeting different categories.
Should you buy Oddity stock?
Oddity stock is down 26% from its first-day closing price last year. It debuted at a fairly high price, although at current levels, it could be a bargain. It trades at a price-to-sales ratio of 3.8 and a forward-one-year price-to-earnings ratio of 21, both of which look like a good deal for a high-growth, profitable stock.
However, it's not without risk. Just two weeks ago, a short seller published a report claiming that Oddity hasn't disclosed that it operates some physical stores and that it's dealing with hundreds of lawsuits. Oddity refuted the claims, and the report didn't seem to move the needle on the stock.
But Oddity is young, and as a stock that's been on the market for less than a year, it doesn't have a proven track record. It looks like it could be a game changer in its industry, but it's only for the risk tolerant right now.
