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Shares of Ulta Beauty (ULTA) have been strong performers lately, with the stock up 6.6% over the past month. The stock hit a new 52-week high of $364.26 in the previous session. Ulta Beauty has gained 26% since the start of the year compared to the -3.1% move for the Zacks Retail-Wholesale sector and the -13.5% return for the Zacks Retail - Miscellaneous industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 27, 2021, Ulta reported EPS of $4.1 versus consensus estimate of $1.92.
For the current fiscal year, Ulta is expected to post earnings of $12.17 per share on $7.84 billion in revenues. This represents a 161.16% change in EPS on a 27.38% change in revenues. For the next fiscal year, the company is expected to earn $14 per share on $8.52 billion in revenues. This represents a year-over-year change of 15.02% and 8.74%, respectively.
Ulta may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Ulta has a Value Score of C. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 29.7X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 36.3X versus its peer group's average of 9X. Additionally, the stock has a PEG ratio of 1.8. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Ulta currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Ulta passes the test. Thus, it seems as though Ulta shares could have potential in the weeks and months to come.
How Does Ulta Stack Up to the Competition?
Shares of Ulta have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including DICKS Sporting Goods (DKS), Tractor Supply (TSCO), and AutoZone (AZO), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 42% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Ulta, even beyond its own solid fundamental situation.
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Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
Tractor Supply Company (TSCO) : Free Stock Analysis Report
DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
AutoZone, Inc. (AZO) : Free Stock Analysis Report
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