Ulta Salon: Beauty Buy

04/27/2017 2:50 am EST

Focus: STOCKS

Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Ulta Salon, Cosmetics & Fragrance (ULTA) is the largest beauty retailer in the U.S. providing one-stop shopping for 21,000 prestige, mass market and salon products and services, notes value investor Roy Ward, editor of Cabot Benjamin Graham Value Investor

The company operates 974 stores in 48 states after opening 25 stores in the latest quarter. Ulta offers affordable indulgence to its customers by combining the product breadth, value and convenience of a beauty superstore with the distinctive environment and experience of a specialty salon.

During the 12 months ended January 31st, Ulta’s sales surged 25% and EPS jumped 33%. Sales will likely increase 19% and EPS will jump 22% to $8.50 during the next 12 months ending April 30th, 2018. New store openings and new store sales could propel sales and earnings higher.

ULTA shares are not cheap, but earnings growth of 40% per year during the past five years justifies the current P/E of 41.1. It s 31% return on equity makes the stock attractive to investors like Warren Buffett. Buy at $293.65 or below.

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