Ulta Salon: Breakout Beauty??

12/21/2016 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout candidate is a company that sells beauty products to salons and provides salon services in the U.S., explains technical expert Leo Fasciocco, editor of Ticker Tape Digest.

Ulta Salon, Cosmetics & Fragrances (ULTA) is a beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States.

The company offers about 21,000 beauty products organized by category in open, self-service displays to encourage its customers to test and explore the products.
ULTA offer a full-service salon and a range of salon hair care products in all of its stores. Annual revenues are $4.5 billion.

Over the last 12 months, the stock has risen 40% versus a 9% gain for the S&P 500. The stock hit an all-time peak of $278.62 in August. It fell back, formed a cup-an-handle base and is now rallying and poised to breakout.

Analysts expect ULTA's net for the fiscal year ending January of 2017 to jump 28% to $6.38 a share from $4.98 a year ago.

The stock has a p/e of 40. That is high given the earnings growth rate. So, the stock is best for an aggressive investor.

Net for the upcoming fiscal fourth quarter ending in January should climb 26% to $2.13 a share from $1.69 a year ago. The highest estimate on the Street is at $2.16 a share.

We sees good chances for an upside surprise. ULTA topped the consensus estimate the past eight quarters. Impressive!

Looking out to fiscal 2018 ending in January, profits are projected to climb 24% to $7.93 a share from the anticipated $6.38 in fiscal 2017.

Institutional sponsorship is excellent. The largest fund holder is the 5-star rated VA College America Growth Fund of America 529F.

Akey fund buyer recently was the 4-star rated Harbor Capital Appreciation Inst. Fund which purchased 510,648 shares as a new position.  

We suggest accumulation of a partial stake in ULTA with further buying to be done on a breakout over $269.30. We are targeting the stock for a move to $310 after a breakout.

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