Ulta Beauty Inc (ULTA, Financial) recently experienced a daily decline of 5.21%, yet it has achieved a 3-month gain of 9.18%. With an Earnings Per Share (EPS) of 26.05, investors are keen to understand if the current stock price reflects the company's fair value. This article delves into Ulta Beauty's valuation to determine if the stock is fairly valued, overvalued, or undervalued. Continue reading for a detailed analysis of Ulta Beauty's intrinsic value.
Company Introduction
Ulta Beauty Inc (ULTA, Financial), the largest specialized beauty retailer in the U.S., operates 1,355 stores and has a partnership with Target. With a diverse product range including makeup, fragrances, skin care, and hair care, as well as salon services, Ulta Beauty has established a strong presence in the beauty industry. Founded in 1990 and headquartered in Bolingbrook, Illinois, the company has a market cap of $26 billion and reported sales of $11.20 billion. Comparing Ulta Beauty's current stock price of $535.68 to the GF Value of $588.37 provides a baseline for our valuation assessment.
Summarize GF Value
The GF Value is a unique intrinsic value calculation that incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. When a stock's price significantly deviates from the GF Value Line, it may indicate overvaluation or undervaluation, affecting potential future returns. Ulta Beauty (ULTA, Financial) is currently deemed fairly valued, suggesting that long-term returns could align with the company's business growth rate.
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Financial Strength
Investing in companies with solid financial strength is crucial to minimize the risk of capital loss. Ulta Beauty's cash-to-debt ratio of 0.06 places it lower than 88.48% of its industry peers. With a financial strength ranking of 5 out of 10, Ulta Beauty's financial health is considered fair.
Profitability and Growth
Ulta Beauty has consistently been profitable for the past decade, which is a positive sign for investors. The company's operating margin of 14.85% is impressive, ranking higher than 88.18% of companies in the same sector. With strong profitability and a profitability rank of 9 out of 10, Ulta Beauty stands out as a robust investment option.
Growth is another critical factor in valuing a company. Ulta Beauty's 3-year average revenue and EBITDA growth rates are better than the majority of their industry counterparts, indicating a solid growth trajectory.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into profitability and value creation. Ulta Beauty's ROIC of 30.99 is significantly higher than its WACC of 8.54, indicating effective capital management and shareholder value creation.
Conclusion
In summary, Ulta Beauty (ULTA, Financial) is fairly valued in the current market, reflecting a balance between its stock price and intrinsic value. The company exhibits fair financial health, robust profitability, and commendable growth. These factors, combined with its superior ROIC to WACC ratio, make Ulta Beauty an attractive option for value investors. For a deeper dive into Ulta Beauty's financials, explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
