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What Should Investors Know About The Future Of Ulta Beauty, Inc.'s (NASDAQ:ULTA)?

Simply Wall St

The most recent earnings release Ulta Beauty, Inc.'s (NASDAQ:ULTA) announced in February 2019 showed that the company experienced a robust tailwind, leading to a double-digit earnings growth of 19%. Today I want to provide a brief commentary on how market analysts perceive Ulta Beauty's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

View our latest analysis for Ulta Beauty

Market analysts' prospects for the upcoming year seems optimistic, with earnings growing by a robust 13%. This growth seems to continue into the following year with rates reaching double digit 27% compared to today’s earnings, and finally hitting US$930m by 2022.

NasdaqGS:ULTA Past and Future Earnings, April 23rd 2019

Although it’s useful to understand the rate of growth each year relative to today’s level, it may be more valuable analyzing the rate at which the earnings are rising or falling every year, on average. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Ulta Beauty's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 10%. This means, we can expect Ulta Beauty will grow its earnings by 10% every year for the next couple of years.

Next Steps:

For Ulta Beauty, I've compiled three essential aspects you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is ULTA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ULTA is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ULTA? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.