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Ulta Beauty (ULTA) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research

Ulta Beauty (ULTA) closed at $244.33 in the latest trading session, marking a -0.8% move from the prior day. This change lagged the S&P 500's daily gain of 0.05%. At the same time, the Dow added 0.11%, and the tech-heavy Nasdaq gained 0.11%.

Heading into today, shares of the beauty products retailer had lost 0.73% over the past month, lagging the Retail-Wholesale sector's gain of 1.18% and the S&P 500's gain of 4.32% in that time.

Investors will be hoping for strength from ULTA as it approaches its next earnings release, which is expected to be December 5, 2019. On that day, ULTA is projected to report earnings of $2.15 per share, which would represent a year-over-year decline of 1.38%. Meanwhile, our latest consensus estimate is calling for revenue of $1.69 billion, up 8.46% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $11.96 per share and revenue of $7.40 billion, which would represent changes of +10.23% and +10.19%, respectively, from the prior year.

Any recent changes to analyst estimates for ULTA should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. ULTA currently has a Zacks Rank of #4 (Sell).

In terms of valuation, ULTA is currently trading at a Forward P/E ratio of 20.6. Its industry sports an average Forward P/E of 11.87, so we one might conclude that ULTA is trading at a premium comparatively.

Investors should also note that ULTA has a PEG ratio of 1.23 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Retail - Miscellaneous industry currently had an average PEG ratio of 1.55 as of yesterday's close.

The Retail - Miscellaneous industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 152, which puts it in the bottom 41% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow ULTA in the coming trading sessions, be sure to utilize Zacks.com.


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