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ULTA (Ulta Beauty) Earnings Power Value (EPV) : $244.66 (As of Jan25)


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What is Ulta Beauty Earnings Power Value (EPV)?

As of Jan25, Ulta Beauty's earnings power value is $244.66. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is -46.11

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


Ulta Beauty Earnings Power Value (EPV) Historical Data

The historical data trend for Ulta Beauty's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Ulta Beauty Earnings Power Value (EPV) Chart

Ulta Beauty Annual Data
Trend Jan16 Jan17 Jan18 Jan19 Jan20 Jan21 Jan22 Jan23 Jan24 Jan25
Earnings Power Value (EPV)
Get a 7-Day Free Trial Premium Member Only Premium Member Only 85.87 118.96 171.01 208.41 -

Ulta Beauty Quarterly Data
Apr20 Jul20 Oct20 Jan21 Apr21 Jul21 Oct21 Jan22 Apr22 Jul22 Oct22 Jan23 Apr23 Jul23 Oct23 Jan24 Apr24 Jul24 Oct24 Jan25
Earnings Power Value (EPV) Get a 7-Day Free Trial Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 208.41 211.70 217.27 216.70 -

Competitive Comparison of Ulta Beauty's Earnings Power Value (EPV)

For the Specialty Retail subindustry, Ulta Beauty's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


Ulta Beauty's Earnings Power Value (EPV) Distribution in the Retail - Cyclical Industry

For the Retail - Cyclical industry and Consumer Cyclical sector, Ulta Beauty's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where Ulta Beauty's Earnings Power Value (EPV) falls into.



Ulta Beauty Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

Ulta Beauty's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 9,499
DDA 264
Operating Margin % 13.02
SGA * 25% 577
Tax Rate % 23.89
Maintenance Capex 279
Cash and Cash Equivalents 703
Short-Term Debt 288
Long-Term Debt 1,635
Shares Outstanding (Diluted) 46

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = 13.02%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = $9,499 Mil, Average Operating Margin = 13.02%, Average Adjusted SGA = 577,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 9,499 * 13.02% +577 = $1814.141801055 Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = 23.89%, and "Normalized" EBIT = $1814.141801055 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = 1814.141801055 * ( 1 - 23.89% ) = $1380.743324783 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 264 * 0.5 * 23.89% = $31.49863054 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = 1380.743324783 + 31.49863054 = $1412.241955323 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Ulta Beauty's Average Maintenance CAPEX = $279 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Ulta Beauty's current cash and cash equivalent = $703 Mil.
Ulta Beauty's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 1,635 + 288 = $1923.234 Mil.
Ulta Beauty's current Shares Outstanding (Diluted Average) = 46 Mil.

Ulta Beauty's Earnings Power Value (EPV) for Jan25 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( 1412.241955323 - 279)/ 9%+703-1923.234 )/46
=244.66

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( 244.66302448168-357.48 )/244.66302448168
= -46.11%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


Ulta Beauty  (NAS:ULTA) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


Ulta Beauty Earnings Power Value (EPV) Related Terms

Thank you for viewing the detailed overview of Ulta Beauty's Earnings Power Value (EPV) provided by GuruFocus.com. Please click on the following links to see related term pages.


Ulta Beauty Business Description

Address
1000 Remington Boulevard, Suite 120, Bolingbrook, IL, USA, 60440
With more than 1,400 freestanding stores and a partnership with Target, Ulta Beauty is the largest specialized beauty retailer in the US. The firm offers makeup (41% of 2023 sales), fragrances, skin care (19% of sales), and hair care products (19% of sales), and bath and body items. Ulta offers private-label products and more than 600 individual brands. It also offers salon services, including hair, makeup, skin, and brow services, in all stores. Most Ulta stores are approximately 10,000 square feet and are in suburban strip centers. The firm intends to open franchises in Mexico in 2025. Ulta was founded in 1990 and is based in Bolingbrook, Illinois.
Executives
Catherine Ann Halligan director 243 CASELLI AVENUE, SAN FRANCISCO CA 94114
Jodi J Caro officer: GC and Corporate Secretary 130 EAST RANDOLPH STREET, CHICAGO IL 60601
Mrkonic George R Jr director C/O BORDERS GROUP INC, 100 PHOENIX DRIVE, ANN ARBOR MI 48108
Kecia Steelman officer: Chief Operating Officer 1000 REMINGTON BLVD SUITE 120, BOLINGBROOK IL 60440
Anita Jane Ryan officer: Chief Human Resources Officer 1000 REMINGTON BLVD., SUITE 120, BOLINGBROOK IL 60440
Lorna Nagler director 2400 XENIUM LANE NORTH, PLYMOUTH MN 55441
Kelly E Garcia director 30 FRANK LLOYD WRIGH DR, ANN ARBOR MI 48105
Heidi G Petz director 101 W. PROSPECT AVENUE, CLEVELAND OH 44115
Gisel Ruiz director C/O VITAL FARMS, INC., 3601 SOUTH CONGRESS AVENUE, SUITE C100, AUSTIN TX 78704
Mike C. Smith director STITCH FIX, INC., ONE MONTGOMERY STREET, SUITE 1500, SAN FRANCISCO CA 94104
Michael R Macdonald director 810 DSW DRIVE, COLUMBUS OH 43219
Patricia A Little director 999 W BIG BEAVER ROAD, TROY MI 48084
Michelle L Collins director C/O MOLEX INCORPORATED, 2222 WELLINGTON COURT, LISLE IL 60503
David C Kimbell director, officer: Chief Executive Officer 8410 W. BRYN MAWR, CHICAGO IL 60631
Scott M Settersten officer: Chief Financial Officer 1000 REMINGTON BLVD., SUITE 120, BOLINGBROOK IL 60440