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Ulta Beauty Analysis (NASDAQ: ULTA)



Ulta Beauty (ULTA) has performed exceptionally well in the past year!  Earnings have beaten Wall Street expectations, and the company's financials reflect outstanding returns on equity (ROE) and returns on invested capital (ROIC).  I decided to dig a bit deeper to determine what's underneath the hood.  An outstanding 1-year performance is great, but is this a solid long-term investment? Is it a good value-play?

Ulta Beauty


Ulta Beauty is a retailer that offers cosmetics, fragrances, skincare & haircare products, bath & body products, and salon styling tools.  It's got 1,300+ retail stores across the U.S., and it also sells via its website and mobile applications.

Past Performance

The common stock of ULTA is up +15.2% over the past 1-year period, reflecting a very solid return on investment (ROI) in the past year.  In contrast, the S&P 500 is down -15.9% and the NASDAQ is also down a staggering -29.6% in the past 1 year.  So, while the market overall is lagging, there's still a lot of excitement surrounding ULTA.  It'll be interesting to analyze and see what's driving that!

Stock Performance

First, I'll also take a look at how well the stock has performed over the past 5 years, and the past 10 years as well.

5 year Performance
Ulta Beauty Analysis
Source:  Fidelity Investments

We can clearly observe an upward trend in the movement of the stock's price over the past 5 years.  It reflects a 106.17% increase in per share price and a 61% compounded annual growth rate (CAGR), which is phenomenal! As was the case with many businesses, especially retailers, we can clearly see a prominent dip in the stock's price in early 2020 due to COVID.  But, we can also observe a huge bounce back since then!

10-year Performance

Ulta Beauty Analysis
Source: Fidelity Investments

Over the course of 10 years, the stock's upward trend is even more pronounced, as it has incurred an increase in its per share price +353.04%! Ulta is shaping up to be one of the best stocks to buy now.

Operating History and Financial Analysis

Let's do a bit of financial analysis. Taking a look at some of the key financial metrics for ULTA, it's clear that management has acted with shareholders' and stakeholders' interests in mind. Although the company does not currently pay a dividend, we see strong figures as it applies to return on equity (ROE), return on total capital (ROTC), return on assets (ROA), and profit margins.  Management appears very effective in leveraging the company's assets and internal resources, and compared to the sector median, it is outperforming in all areas.

Ulta Beauty Analysis

The high ROE and ROTC of 62.03% and 25.23%, respectively, tells us that the company operates very profitably and efficiently, and it's doing a superb job of managing the capital that's been invested by shareholders and debtholders. It's also managing its assets very well, as indicative of the high ROA. Let's also take a look at how some of these key metrics have been trending over time.

Ulta Beauty Analysis
Key Financial Metrics Over Past 5 Years - Source:

Looking back at the last 5 years, we see a very favorable trend in all of the key financial metrics highlighted above. The fiscal year 2021 is an anomaly though!  ULTA operates on a fiscal year that ends in the month of January. So, the FY21 downturn in performance is actually driven by COVID in 2020, but as we can see, the company has rebounded nicely since then.

Business Model

ULTA has really effectively adopted the omni-channel customer experience. Customers can visit any one of its 1,300+ retail stores or place an order online. Online sales grew at a 35% compounded annual growth rate (CAGR) from 2017 - 2021.  ULTA also has set up and owns 100 "shop-in-shops" inside Target locations to capture new customers. The number of these is likely to grow going forward!

The company has also established a loyalty program dubbed ULTAmate Rewards.  This program increased 10% year-over-year and now entails over 38 million active users, generating about 95% of ULTA's sales revenue. With such a large base of its customers actively participating in its rewards program, the company can regularly extract key customer data to act strategically and aid in furthering its competitive advantage.  

Service customers spend 3x as much compared to non-service buyers.  Hence, ULTA leverages its position in offering salon services such as makeup, eyebrows & wax, skin care, and other services to customers in-person.  About 50% of these salon service customers also end up buying retail products at the time of their visit, and they're more likely to visit retail locations more frequently each year. The fact that many of its customers enjoy sampling products in-person and appreciate the personalization offered at stores has helped the company successfully compete with other e-commerce retailers.

Omni-Channel Offering

Ulta is more than a retail destination; it's a one-stop shop complete with haircare products, makeup, fragrances, skincare services, and more. 


U.S. Beauty Products Market
ULTA - Products Mix

ULTA retails products from a variety of top brands such as Clinique, Lancome, and Estee Lauder.  I personally shop regularly at ULTA for their skincare products, such as the Kiehl's Ultra Facial Cream and CeraVe skin renewing moisturizer, as well as great men's fragrances by YSL and Dior, among others.  Some of their best selling products like BareMinerals foundation and Smashbox cosmetics are also regularly bought and used by my wife and other family/friends.  The products are high quality, diverse, and ESG friendly, and ULTA's customer service at its stores are exceptional! They also usually have coupons (though there are exclusions) and  points can be used for discounts on orders.  All of this really fuels the success of the company.

  • Ulta Beauty has enjoyed excellent returns over the years thanks to an amazing business model.
  • The company has successfully navigated the COVID restrictions, which for a retailer is a great accomplishment.
  • Today, the stock is easily beating the market and will probably continue to do so.

Future Outlook

From my perspective, there's good reason why ULTA Beauty is dominating the market and demonstrating resiliency.  I don't expect it to match its tremendous historical growth, but there's still plenty of room for more growth going forward.  The company has opened around 50 new stores in 2022, and its e-commerce platform also remains poised for more growth.  The company aims to achieve compounded net sales growth of 5% to 7% and earnings growth in the low double digits, both of which are attainable, considering historical and recent trends.

Ulta Beauty - Summary-level Strategy

ULTA Beauty has a robust strategy for maintaining its competitive advantage going forward. It is focused on 6 key strategic pillars designed to expand its market leadership and drive longer-term, profitable growth:

  1. Drive breakthrough and disruptive growth through an expanded definition of All Things Beauty.
  2. Evolve the omnichannel experience through connected physical and digital ecosystems, All In Your World.
  3. Expand and deepen our presence across the beauty journey, solidifying Ulta Beauty at the Heart of the Beauty Community.
  4. Drive operational excellence and optimization.
  5. Protect and cultivate our world-class culture and talent.
  6. Expand our environmental and social impact.

While ULTA continues to expand its retail store openings, it also has lots of potential to expand its "shop-in-shop" presence in partnership with Target, which has nearly 2,000 stores in the U.S.  It also intends to expand its digital footprint.  

ULTA's strong operating margins further reflect its competitive advantage in supply-chain management, and the return on capital employed is much higher than average.  ULTA beauty has an extremely clean balance sheet, with basically no long-term debt, and a healthy $434.2M in cash and cash equivalents.  The company is also in the middle of executing its share buyback program, with $1.6 billion remaining of the original $2 billion authorization from March. This provides a nice asymmetric risk-reward opportunity for investors, as they know that continued repurchases will likely become support in any major downturns.  While past performance is no guarantee of future performance, it certainly points toward a high probability of performing well in the future just as they have in the past. Investing money in Ulta should have significant long-term appreciation.


I am impressed with how resilient ULTA has proven to be, especially after a huge shock from COVID in 2020.  The company continues to produce record sales and earnings even within a difficult economic environment high inflation and competition from e-commerce rivals.

As such, I believe ULTA is a company worthy of addition to one's investment strategy for wealth creation. The current valuation is also quite reasonable, especially considering the extraordinary results the company has delivered in the past.  


The common stock of ULTA is currently trading at a per-share price of $422, but it is easy to argue that Ulta Beauty is still quite cheap!  It has a P/E ratio of 19.68, which is at the low end of historical ranges and is reasonable compared to the average P/E of 28.88 in the retail sector according to CSI Market. The retailer Target is currently trading at a P/E ratio of 20.3, the Home Depot has a P/E of 17.85, and Wal-Mart is trading at a P/E ratio of 27. Amazon is trading at a staggering P/E ratio of 92.94.  It should also be noted that at current levels, there is an enterprise value (EV) to EBIT level of 13.3, just off its low of 7.5 and far from the high at 52.7 in early 2021.

The highest level that ULTA has traded within the past 52 weeks is $451 per share; the lowest is $331 per share.  If you're interested in buying ULTA stock, monitor it, and decide on an opportune time to buy-in for yourself.  As I've said, as long as the fundamentals of the company haven't changed and they remain strong, a decline in the stock's price for other reasons may provide that opportunity.  At the same time, even the current stock price is reasonable for someone with a long-time horizon.  I do not currently own any stock in ULTA, but considering the above analysis, I may very well elect to buy into the company in the very near future!


The information provided on this site is based on my own personal experience, research, and analysis, and it is not to be construed as professional advice. Please conduct your own research before making any investment decisions.  I am not a professional financial advisor, stockbroker, or planner, nor am I a CPA or a CFP. The contents of this site and the resources provided are for informational and entertainment purposes only and do not constitute financial, accounting, or legal advice. The author is not liable for any losses or damages related to actions or failure to act related to the content on this website.

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