Stock (Symbol) |
Ulta Salon (ULTA) |
Stock Price |
$207 |
Sector |
| Retail & Travel |
Data is as of |
| April 14, 2016 |
Expected to Report |
| May 26 |
Company Description |
 Ulta Salon, Cosmetics & Fragrance, Inc. (Ulta) is a beauty retailer. The Company provides salon products and salon services in the United States. It offers a combination of more than 20,000 prestige and mass beauty products. As of January 31, 2015, it operated 774 stores in 47 states. The Company offers products in the categories, including cosmetics, which includes products for the face, eyes, cheeks, lips and nails; haircare, which includes shampoos, conditioners, styling products and hair accessories; salon styling tools, which includes hair dryers, curling irons and flat irons; skincare and bath and body, which includes products for the face, hands and body; fragrance; nail polish and nail care products; men’s skincare, haircare and fragrance products; private label, consisting of Ulta branded cosmetics, skincare, bath and body products and haircare, and other health and beauty products. Source: Thomson Financial |
Sharek’s Take |
 Ulta Salon (ULTA), the largest beauty store in America, got hit last qtr from negative remarks about the stock being overvalued. I read the original report, but searched for it just now and can’t find it (perhaps it was deleted). From what I recall the author’s tak was (1) ULTA saturated the market and is now opening stores too close to each other, (2) same-store sales include online sales and mask the cannibalization between stores, (3) stated the P/E was too high. All were valid points, and the article was timely as well since the stock market was in a correction. Then ULTA posted earnings that beat the street, the company upped guidance, and the stock shot to a new all-time high. The company posted 25% profit growth on 21% sales growth. Same store sales grew an impressive 13% in the qtr, but included e-commerce sales which jumped 44%. Right now ULTA is growing around 25% and has a P/E of 35. I feel the stock is fairly valued here, and would be a good buy on a dip. The goal would be to get in at 25x earnings, which is $150, but that seems too much to ask for at this point. 30x seems more realistic as an entry point and that would be a $180 wish price. |
One Year Chart |
 The one-year chart paints a great picture of the tug-of-war going on with the stock. Note the Fall the stock took in Jan/Feb from the poor stock market and negative remarks. Then the stock popped after earnings, broke out, and continued higher. ULTA has great fundamentals. I especially like that the company has beaten the street and Annual Profit Estimates have increased four straight qtrs. The company sees teens sales growth this year with 18% to 20% profit growth, but management is setting the bar low to beat and raise. |
Fair Value |
 My Fair Value is 35x earnings, which is a tough pill to swallow when profits are growing around 25%. The company just closed out its latest fiscal year, so the $5.98 in profits is the year-ahead figure. I think the best course of action is to hope for a pullback to get in during the slow Summer months. |
Bottom Line |
 Ulta Salon is one of the premier growth stocks on the market today. But right now the stock is at its highs and I feel the best course of action is to wait for a better entry point. If you’re already in the stock: congratulations and I would continue to hold. But I’m not that lucky. I don’t want to get in this high as I feel the online sales contributing to same store sales is hiding the real same store sales number. I also think 35x earnings is a premium price to pay. ULTA is at the top of my radar, I will look to buy it if it dips to around $180. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
