Stock (Symbol) |
Ulta Salon (ULTA) |
Stock Price |
$250 |
Sector |
| Retail & Travel |
Data is as of |
| July 14, 2016 |
Expected to Report |
| Aug 25 |
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 |
 Shares of Ulta Salon (ULTA), the largest beauty store in America, are flying high. Last qtr the company posted 39% profit growth on a 24% gain in sales — including a sparkling 15% gain in same store sales. Management sees the solid growth continuing and now expects comparable sales growth between 10.0% and 12.0%, which is up from the previous guidance of 8.0% to 10.0%. Same store sales is in my opinion the main indicator for a retail stock’s performance, and ULTA shares have surged since posting 13% SSS growth 2 qtrs ago. Ulta is a fantastic retailer, and this is a stock I wish I owned, but it has always seemed too high — then it goes higher. Right now the stock has a 41 P/E and is expected to grow profits 20% next qtr. If the company beats the street like it has been, perhaps 34% growth is in store. Still, I feel the stock is on a parabolic run and a little selloff could cause a snowball effect. I have ULTA on the radar and will continue to wish for it to come down so I can buy. |
One Year Chart |
 Very strong surge in the stock price ever since ULTA reported profits 2 qtrs ago and broke out on the news. But now the stock seems extended after a run from $150 to $250 without a correction. I’m also afraid of that 41 P/E. If ULTA’s P/E went down to a more reasonable 35 the stock would fall to $215 — and that should be a good price to wish for if you’re trying to buy in (like me). Profit Estimates for the next 4 qtrs are 20%, 15%, 18% and 21%. The company has beaten the street by 16 cents the last 2 qtrs, but only by 3 cents and 6 cents the prior two qtrs. I feel if ULTA doesn’t beat by a big margin again next qtr the stock could come down some. |
Fair Value |
 My Fair Value is 35x earnings, which is $215 this year and $262 next year. Annual profit estimates have jumped for two straight qtrs, thus this Fair Value will likely rise if that happens again. |
Bottom Line |
 Ulta Salon is flying high as the company clicks on all cylinders. But when I look at the ten-year chart I get the impression the stock is on a parabolic run and could crack at any time. The company and its management could continue to shine, yet the stock could come down 20% or more just because of the chart pattern. ULTA is a great stock, but it’s too high to buy right now. I’ll look to buy in if ULTA corrects around 15% to 20%. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
