Ulta Salon: Breakout in Beauty

07/09/2015 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest breakout candidate is a company whose stores provide cosmetics, fragrance, haircare, skincare, bath and body products, and salon styling tools, explains Leo Fasciocco, editor of Ticker Tape Digest.

Ulta Salon, Cosmetics & Fragrances (ULTA) is in a 10-week flat base and is close to a potential breakout, poised to challenge its all time high of $159.85. With solid earnings growth on tape, we suggest accumulation.

For the upcoming fiscal second quarter ending in July, analysts are looking for an 18% rise in net to $1.11 a share from 94 cents the year before. The highest estimate is at $1.13 a share.

We believe there's a good chance for an upside surprise. The company has topped the consensus estimate the past four quarters by 11 cents a share, 9 cents, 8 cents, and 12 cents.

Looking out to the fiscal third quarter ending in October, the Street is forecasting a 13% gain in net to $1.03 a share from 91 cents the year before.

This fiscal year ending in January of 2016, analysts are forecasting a 17% increase in net to $4.67 a share from $3.98 a year ago.

The stock sells with a price-earnings ratio of 33. That is high, suggesting the stock is most appropriate for aggressive investors.

Going out to fiscal 2017 ending in January, the Street projects an 18% gain in net to $5.53 a share from the anticipated $4.67 this fiscal year.

We suggest accumulation of a partial stake with further buying to take place on a breakout over $158. We are targeting the stock for a move to $190 within the next few months or sooner.

A protective stop can be placed near $150 after a breakout. There is also a chance for a stock split which could boost the stock.

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