Yahoo Finance When Should You Buy Ulta Beauty Inc (NASDAQ:ULTA)?
Let’s talk about the popular Ulta Beauty Inc (NASDAQ:ULTA). The company’s shares saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Ulta Beauty’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Ulta Beauty
What’s the opportunity in Ulta Beauty?
According to my valuation model, the stock is currently overvalued by about 21.46%, trading at US$246 compared to my intrinsic value of $202.75. This means that the opportunity to buy Ulta Beauty at a good price has disappeared! Another thing to keep in mind is that Ulta Beauty’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Ulta Beauty generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Ulta Beauty’s earnings over the next few years are expected to increase by 42.95%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in ULTA’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ULTA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on ULTA for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for ULTA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Ulta Beauty. You can find everything you need to know about Ulta Beauty in the latest infographic research report. If you are no longer interested in Ulta Beauty, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
