Stock (Symbol) |
Ulta Salon (ULTA) |
Stock Price |
$184 |
Sector |
| Retail & Travel |
Data is as of |
| December 10, 2015 |
Expected to Report |
| Mar 10 |
Company Description |
 Ulta Salon, Cosmetics & Fragrance, Inc. (Ulta) is a beauty retailer, which provides one-stop shopping for prestige, mass and salon products and salon services in the United States. During the year ended January 28, 2012 (fiscal 2011), the Company opened 61 new stores. It operates full-service salons in all of its stores. Its Ulta store format includes an open and modern salon area with approximately eight to 10 stations. The entire salon area is approximately 950 square feet with a concierge desk, skin treatment room, semi-private shampoo and hair color processing areas. Each salon is a full-service salon offering hair cuts, hair coloring and permanent texture, with salons also providing facials and waxing. Source: Thomson Financial |
Sharek’s Take |
 Ulta Salon (ULTA) is a hot stock this year, rising from $128 to $184 (+44%) with three trading days left in the year. What’s fueling the stock is sizzling same store sales growth, which clocked in at 13% last qtr on top of 10% the qtr earlier. Same store sales growth is my most important factor when evaluating a retail stock, and I can’t recall a retail stock not rising the qtr after posting double digit SSS growth.Ulta, the largest beauty retailer in America, opened 45 stores last qtr to bring its total to 860. It sells 20,000 products from 48 states, which is great because there’s no F/X eating away at sales and profit growth. The beauty supply store/salon has now posted 21 straight qtrs of double-digit sales and profit growth. ULTA is the top stock on my radar — I’m dying to buy — but I’m wishing for a pullback to buy in. At $184 ULTA is within 8% of my 2016 Fair Value of $200 |
One Year Chart |
 I’m very disappointed in myself for not buying into the stock when it dipped below $160 earlier this Fall. Then the company came out with earnings — which were applauded by investors — and the stock gapped higher. Now the P/E of 32 is rather rich when compared to Estimates for the next 2 qtrs. With year end approaching, I feel fund managers are buying ULTA to show it as a top holding. Perhaps the stock calms down in January. |
Fair Value |
 Although ULTA has grown profits 22% on average the last 3 years, the stock almost always has a P/E of around 32. In the end I have to realize this stock gets a premium valuation. My Fair Value for 2016 & 2017 is 35x earnings, which equates to $200 and $239 respectively. Having all sales in the U.S. has put ULTA in a premium position. |
Bottom Line |
 Ulta Salon is in a premium position. The company isn’t being negatively affected by the strong dollar and doesn’t seem to be getting canabalized from Amazon.com because you can’t smell or try on cosmetics on the Internet. ULTA is the top stock on my radar right now and I hope it falls 10% so I can get in at a better price. The current quote of $184 seems high, and leaves little upside to 2016’s Fair Value. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
