3 Reasons SKIN is Risky and 1 Stock to Buy Instead

September 01, 2025 at 00:00 AM EDT

SKIN Cover Image

The past six months have been a windfall for BeautyHealth’s shareholders. The company’s stock price has jumped 63.1%, hitting $2.08 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy BeautyHealth, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think BeautyHealth Will Underperform?

We’re happy investors have made money, but we're swiping left on BeautyHealth for now. Here are three reasons why SKIN doesn't excite us and a stock we'd rather own.

1. Revenue Spiraling Downwards

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, BeautyHealth’s demand was weak and its revenue declined by 1.6% per year. This wasn’t a great result and signals it’s a low quality business.

2. Fewer Distribution Channels Limit its Ceiling

With $310.1 million in revenue over the past 12 months, BeautyHealth is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

3. Operating Losses Sound the Alarms

Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.

Unprofitable public companies are rare in the defensive consumer staples industry. Unfortunately, BeautyHealth was one of them over the last two years as its high expenses contributed to an average operating margin of negative 27.1%.

BeautyHealth Trailing 12-Month Operating Margin (GAAP)

Final Judgment

We see the value of companies helping consumers, but in the case of BeautyHealth, we’re out. After the recent surge, the stock trades at 13.7× forward EV-to-EBITDA (or $2.08 per share). At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.

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