Shares of hot initial public offering (IPO) stock Oddity Tech (ODD 6.95%) gained 33% in November, according to data from S&P Global Market Intelligence. It reported another round of excellent results, bolstering investor enthusiasm in its future potential.
An emerging leader in a growing industry
Oddity went public in July. It was one of few IPOs this year, and one of even fewer that are drawing investors’ interest. It sells cosmetics though digital channels under the brand name Il Makiage and hair and skincare products through the digital brand SpoiledChild.
While most cosmetics companies use digital channels these days, Oddity stands out for two reasons: It sells exclusively online, and it uses artificial intelligence to address consumer concerns. It has developed what it calls the “powermatch system,” which it says analyzes skin tone and skin care needs through a phone camera more accurately than the human eye, using data science and machine learning. It also leverages a social-media platform to recruit influencers and bloggers to create and post videos on its site to engage customers. This approach is well suited for reaching its younger population demographic.
Oddity was posting high growth and profit when it went public, and that trend continued in the second quarter, its first as a public company. It sustained the trend with excellent third-quarter results. Revenue increased 37% over last year to $94 million, and net income rose from $2.8 million to $3.8 million, both ahead of guidance. Management raised full-year guidance for revenue, gross margin, earnings per share, and adjusted earnings before interest, taxes, depreciation, and amortization.
Is it the right time to buy Oddity stock?
There aren’t that many early IPO opportunities these days. Many stocks come on to the market with inflated prices or no profits, or past their highest growth.
Oddity stock also launched at a high price and jumped quickly, but it’s down 23% since its first-day closing price. At this price, it trades at a forward one-year price-to-earnings ratio of 22, which is a bargain for a company demonstrating high growth and increasing profit, and that has a massive future opportunity.
I would still caution investors to wait to buy shares until after the lockup period, coming in January, and re-evaluate the stock at the time. But it’s definitely a stock to keep on your watchlist as it disrupts traditional beauty retail and captures market share.
Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.