Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Goldman Sachs Group, Inc. (GS): Is Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

ulta-logo

What we’re looking for
The graphs you’re about to see tell Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA)’s key statistics:

ULTA Total Return Price Chart

ULTA Total Return Price data by YCharts.

Passing Criteria 3-Year* Change Grade
Revenue growth >30% 82.8% Pass
Improving profit margin 104.2% Pass
Free cash flow growth >Net income growth (37.3%) vs. 273.2% Fail
Improving EPS 242.8% Pass
Stock growth (+ 15%) <EPS growth 311.3% vs. 242.8% Fail

Source: YCharts. * Period begins at end of Q2 (April) 2010.

ULTA Return on Equity Chart

ULTA Return on Equity data by YCharts.

Passing Criteria 3-Year* Change Grade
Improving return on equity 43.9% Pass
Declining debt to equity No debt Pass

Source: YCharts. * Period begins at end of Q2 (April) 2010.

How we got here and where we’re going
Ulta could use a little touch-up on its free cash flow, which has been stuck in neutral for years as earnings have soared. The company’s flying share price has also cost it a passing grade by getting too far ahead of the growth in its earnings. However, Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) still mustered five out of seven passing grades, which is a strong showing — we can’t grade the company on dividends, as it only made one special payout a year ago. What can this salon supplier do to get itself a perfect score next time? Let’s dig a little deeper.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...