ULTA on watch list

I am a week late with both this post and my purchasing.  Ulta Beauty is a brick and mortar purveyor of cosmetics and fragrances as well as salon services.  I invested in it in the 2014-2015 timeframe, but sold in January 2016.  The reason I sold was that the quarterly filing stated that ULTA foresaw 1200 stores or more and I ignored or did not note the “or more”.  At that time they had 860 stores and were adding 100 per year.  That left 3-1/2 years of growth which could easily have justified a “hold”.  However, p/e had risen from 26 to 37.  We had recently been through the Skechers episode where growth rate was declining while p/e was growing which led to a sharp drop in share price at the first bit of fear and doubt.  So I exited.  I put it in CAPS as underperform over 5 year period.  Somewhere I posted all this, either Weekly Analysis Club or ULTA though I haven’t found that post.  I figured ULTA would out perform for a year or so but over 5 it would underperform.  So, ULTA has been a drag on my CAPS for nearly 2 years.  

I don’t check CAPS regularly.  But I did last Thursday or Friday and was surprised that ULTA was a plus on my CAPS scorecard.  I investigated and saw that ULTA had dropped from around $310  to 190 since about July.  Most recently, the Amazon flue hit it with stories that Amazon was entering or increasing focus on cosmetics, et. al.

Over the weekend I checked the press releases and recorded the revenue and eps which are as follows:

Quarter	       Revenue	        eps
Q3 13		 619		0.70
Q4 13		 887		1.09
Q1 14		 714		0.77
Q2 14		 734		0.94
Q3 14		 746		0.91
Q4 14		1048		1.35
Q1 15		 868		1.04
Q2 15		 877		1.15
Q3 15		 911		1.11
Q4 15		1268		1.69
Q1 16		1073		1.45
Q2 16		1069		1.43
Q3 16		1131		1.40
Q4 16		1581		2.24
Q1 17		1315		1.86
Q2 17		1290		1.83

Comes to 23% growth of TTM revenue and 29% of TTM eps.  Not ground shaking but at the time the p/e had come from 48 down to 26 .   With earnings coming up, TTM earnings could be $7.60 to $7.80.  Unfortunately, ULTA popped 4.5% Friday and a little more Tuesday, closing at $202.28.    

I bought a micro position yesterday and have an alert set at $187.   ULTA is another understandable business as is LGIH.  That is worth something in putting together a portfolio. If TTM earnings come to $7.70 and a 29% eps growth, one could project $223 fair price at p/e of 29.  Ulta has traded at 30 to 40 p/e for three years until five or six weeks ago.  The chart is about as ugly as any you will find right now.   IMO, ULTA is worth putting on your watch list.


Weak relative growth ratings and 5th in its group
Composite Rating 44 Fail
EPS Rating 98 Pass
RS Rating 8 Fail
Group RS Rating D- Neutral
SMR Rating A Pass
Acc/Dis Rating C- Neutral

If you want to use charts to supplement your decision, you might wait unitl it retakes the 200dma and hold a few days. Opportunity cost for that would be low.

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