That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to. Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017.
- This allowed the company to attract its target customer, beauty enthusiasts, who account for 77% of the category’s spending in the U.S.
- These are complementary indicators that rate stocks based on value, growth, and/or momentum characteristics.
- This shows the percentage of profit a company earns on its sales.
- When comparing this ratio to different stocks in different industries, take note that some businesses are more capital intensive than others.
- The fiscal fourth quarter is key for retailers amid the usually busy holiday shopping season.
- On the other hand, there were a total of 34 hedge funds with a bullish position in ULTA at the beginning of this year.
It takes the consensus estimate for the current fiscal year (F1) divided by the EPS for the last completed fiscal year (F0) (actual if reported, the consensus if not). Many investors prefer EV to just Market Cap as a better way to determine the value of a company. EBITDA, as the acronym depicts, is earnings before interest, taxes, depreciation and amortization. That means these items are added back into the net income to produce this earnings number. Since there is a fair amount of discretion in what’s included and not included in the ‘ITDA’ portion of this calculation, it is considered a non-GAAP metric.
ULTA Company Calendar
In the fiscal third quarter, the program reached 39 million members, up 9% year over year. These members are vitally important to the business, because approximately 95% of total sales are made to loyalty members. Ulta Beauty has an analyst consensus of Moderate Buy, with a price target consensus of $523.72, which is a 34.82% upside from current levels. Davidson also maintained a Buy rating on the stock with a $495.00 price target.
Jenner launched a new skincare line last year, which Ulta started carrying, as well as the famous lip kits and eyeshadow pallets. Shares have an Accumulation/Distribution rating of C, suggesting an equal amount of buying and selling from institutional investors. The relative strength line, which compares a stock’s price action with that of the S&P 500, crashed in August 2020 and is recovering again.
- This time period essentially shows you how the consensus estimate has changed from the time of their last earnings report.
- At the end of June, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter.
- A D/E ratio of 1 means its debt is equivalent to its common equity.
Ulta believes their share of beauty enthusiasts is 30%, which leaves plenty of room to capture a larger share of this group. Ulta also has a loyalty program which consists of nearly 30 million members as of the end of the most recently reported quarter. The program has shown strong member retention and 90% of total company sales come from loyalty members. Ulta Beauty (ULTA -0.86%) gave shareholders some good reasons to cheer its latest earnings report. The beauty products retailer said in its fiscal 2022 first-quarter update that it is still growing sales at a robust pace as people return to more in-person interactions. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
This shows the percentage of profit a company earns on its sales. The Value Scorecard identifies the stocks most likely to outperform based on its valuation metrics. This list of both classic and unconventional valuation items helps separate which stocks are overvalued, rightly lowly valued, and temporarily undervalued which are poised to move higher. Earnings and revenue are improving but have yet to return to growth. The outlook also remains uncertain with management slashing its capital spending forecast and Covid-19 cases on the rise. As cannabis legalization gains traction, CBD (or cannabidiol) is exploding into new markets.
Others look for those that have lagged the market, believing those are the ones ripe for the biggest increases to come. While earnings are the driving metric behind stock prices, there wouldn’t be any earnings to calculate if there weren’t any sales to begin with. Like earnings, a higher growth rate is better than a lower growth rate. Seeing a company’s projected sales growth instantly tells you what the outlook is for their products and services. As a point of reference, over the last 10 years, the median sales growth for the stocks in the S&P 500 was 14%.
Aside from using absolute numbers, however, you can also find value by comparing the P/E ratio to its relevant industry and its peers. Management mentioned price increases as boosting results this quarter, showing Ulta’s ability to pass price increases along to customers without hurting sales. Management expects this growth to continue, and it raised the company’s full-year fiscal 2022 guidance for revenue, comparable sales, operating margin, and earnings per share. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
But, typically, an aggressive growth trader will be interested in the higher growth rates. The Cash/Price ratio is calculated as cash and marketable securities per share divided by the stock price. The overall spend of loyalty members increased through both higher sales per transaction and more frequent transactions last quarter. As with any loyalty program, Ulta Rewards also provides the company with useful customer data, which can then be used to provide targeted marketing to further drive sales. Management has pointed to this program as being an important driver of long-term growth. Besides its omnichannel options, the company drives growth through its loyalty program, Ulta Rewards.
Undervalued Stocks With Stunning ROIC
While a P/B of less than 3 would mean it’s trading at a discount to the market, different industries have different median P/B values. So, as with other valuation metrics, it’s a good idea to compare it to its relevant industry. Having ended the most recent quarter with just over 1100 stores, this leaves years to their store growth model alone. This allowed the company to attract its target customer, beauty enthusiasts, who account for 77% of the category’s spending in the U.S. Previously, shoppers went to different types of stores, such as drug stores, mass merchants, and salons, depending on their budget. Its elevated valuation suggests that investors might want to watch this stock for now.
We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). Heading into the fourth quarter of 2018, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2018. On the other hand, there were a total of 34 hedge funds with a bullish position in ULTA at the beginning of this year.
Is Ulta Beauty Stock a Buy?
The retailer now sees comps rising between 6% and 8% compared to the prior range of 3% to 4%. Operating margin should rise above 14% to mark a huge improvement compared to the pre-pandemic level of around 12% of sales. Ulta’s first-quarter (which ended April 30) sales rose 21% year over year to trounce Wall Street expectations yet again.
A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often ig group review do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. Some investors seek out stocks with the best percentage price change over the last 52 weeks, expecting that momentum to continue.
Is Ulta Beauty under- or over-valued?
Of course, different industries will have different growth rates that are considered good. So be sure to compare a stock to its industry’s growth rate when sizing up stocks from different groups. In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points.
NEW Sample Issue of Insider Monkey’s Monthly Newsletter and 1 Free Stock Pick
Based on my 2024 EPS forecast, the valuation reflects a forward P/E of 14.66x, which is above consensus due to strong share buybacks. Ulta Beauty’s ROCE for the most recent fiscal year (2023) at 44.42% is significantly higher than the ROCE of its peers, such as Sephora (35.2%) and Estée Lauder (28.7%). This suggests xtb review that Ulta Beauty is generating a great return on its invested capital. Additionally, Ulta Beauty’s ROCE has been consistently high in recent years, increasing from 43.1% in fiscal year 2022 to 44.42% in fiscal year 2023. The Motley Fool has positions in and recommends Target, Ulta Beauty, and Walmart.
Further, we explore the intriguing theory that combining value and momentum metrics can provide a more precise read on a stock’s true momentum compared to its industry counterparts. Ulta Beauty has a strong balance sheet, with a current ratio of 1.61 and a debt-to-equity ratio of 0.97 for fiscal 2023. This means that the company has enough current assets what does a software developer do and how to become one to cover its current liabilities by 1.61 times, and it has slightly more equity than debt. Yet both businesses are growing, profitable, and have a long runway for store expansion ahead. These positive factors suggest they could be good buys for patient investors aiming to take advantage of the current low sentiment around their short-term prospects.