What You Must Know About Ulta Beauty Inc’s (NASDAQ:ULTA) Financial Health
Investors looking for stocks with high market liquidity and zero debt on the balance sheet should consider Ulta Beauty Inc (NASDAQ:ULTA). With a market valuation of $14.83B, ULTA is a safe haven in times of market uncertainty due to its strong balance sheet. These companies are resilient in times of low liquidity and are relatively unimpacted by interest rate hikes. Assessing the most recent data for ULTA, I will take you through the key ratios to measure financial health, in particular, its solvency and liquidity. See our latest analysis for Ulta Beauty
Can ULTA service its debt comfortably?
What is considered a high debt-to-equity ratio differs depending on the industry, because some industries tend to utilize more debt financing than others. As a rule of thumb, a financially healthy large-cap should have a ratio less than 40%. For Ulta Beauty, investors should not worry about its debt levels because the company has none! It has been operating its business with zero debt and utilising only its equity capital. Investors’ risk associated with debt is virtually non-existent with ULTA, and the company has plenty of headroom and ability to raise debt should it need to in the future.
Can ULTA meet its short-term obligations with the cash in hand?
Since Ulta Beauty doesn’t have any debt on its balance sheet, it doesn’t have any solvency issues, which is a term used to describe the company’s ability to meet its long-term obligations. However, another measure of financial health is its short-term obligations, which is known as liquidity. These include payments to suppliers, employees and other stakeholders. With current liabilities at $529.3M, it appears that the company has maintained a safe level of current assets to meet its obligations, with the current ratio last standing at 2.9x. Usually, for Specialty Retail companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
Next Steps:
ULTA has no debt in addition to ample cash to cover its short-term liabilities. Its safe operations reduces risk for the company and its investors, though, some level of debt could also boost earnings growth and operational efficiency. I admit this is a fairly basic analysis for ULTA’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Ulta Beauty to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for ULTA’s future growth? Take a look at our free research report of analyst consensus for ULTA’s outlook.
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-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
