Shares of Ulta Salon (ULTA) are having a banner year. A year ago the stock was $117 and today it’s $168 — a gain of 44%. What’s helped push ULTA higher is profit growth of 27% the last 4 qtrs (on average) and strong same store sales. The beauty supply store/salon has now posted 20 straight qtrs of double-digit sales and profit growth.
ULTA is a great stock — one I should own. But it’s always too-high-to buy in my eyes. Then the stock goes higher and I get left behind.
One Year Chart
Last qtr, Ulta posted sales growth of 20% and profit growth of 22%. Same store sales rose an astounding 10%, which is probably why the stock’s up from $159 to $168 since these charts were created on September 4th.
But looking ahead, profit growth looks to slow into the teens. And with a P/E in the mid-30s the stock might not go anywhere.
Fair Value
My Fair Value on ULTA is 30x earnings, which means a $142 stock price. To me the stock’s gotten ahead of itself and is already at my 2016 Fair Value.
Sharek’s Take
Ulta Salon is having a banner year, and that’s not only reflected in the stock price but in the P/E as well. Today the stock sells for 35x earnings even though projected to have 16% profit growth (on average) the next 4 qtrs. I feel ULTA is too high to buy right now, but I always say that and have gotten left behind for years. Still, after the run-up in the last year I feel ULTA will go through a back-and-forth year and maybe then I’ll get my chance to invest.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
