Is Now The Time To Put Ulta Beauty (NASDAQ:ULTA) On Your Watchlist?

Ulta Salon, Cosmetics & Fragrance, Inc. +1.05%

Ulta Salon, Cosmetics & Fragrance, Inc.

ULTA

549.78

+1.05%

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ulta Beauty (NASDAQ:ULTA). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Ulta Beauty

How Fast Is Ulta Beauty Growing Its Earnings Per Share?

Ulta Beauty has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Ulta Beauty's EPS has risen over the last 12 months, growing from US$21.41 to US$25.65. There's little doubt shareholders would be happy with that 20% gain.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Ulta Beauty achieved similar EBIT margins to last year, revenue grew by a solid 15% to US$11b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqGS:ULTA Earnings and Revenue History October 30th 2023

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Ulta Beauty's future profits.

Are Ulta Beauty Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$19b company like Ulta Beauty. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$30m worth of its stock. This considerable investment should help drive long-term value in the business. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Ulta Beauty Worth Keeping An Eye On?

As previously touched on, Ulta Beauty is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Now, you could try to make up your mind on Ulta Beauty by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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