3 Reasons to Buy Ulta Stock Like There's No Tomorrow

Core Viewpoint - Ulta Beauty's stock has declined by 19% this year, presenting a potential buying opportunity despite its strong market position and future potential [4]. Group 1: Business Model - Ulta Beauty differentiates itself by combining luxury and mass brands under one roof, catering to beauty enthusiasts who account for 83% of total sales [5]. - The company operates 1,375 stores nationwide and has successfully launched store-within-store concepts at select Target locations [6]. - Services offered in Ulta's large stores enhance customer loyalty and drive product sales, creating a flywheel effect [2]. Group 2: Financial Performance - In the first quarter of fiscal 2024, Ulta's sales increased by 3.5% to $2.7 billion, with comparable sales rising by 1.6% [7]. - Earnings per share (EPS) decreased from $6.88 to $6.47, and operating margin fell from 16.8% to 14.7% due to inflationary pressures [7]. - Despite the decline in profitability, Ulta carries zero debt and generates steady free cash flow, indicating financial stability [8]. Group 3: Investment Opportunity - Ulta is currently trading at a forward price-to-earnings multiple of under 14, which is considered a bargain given its long-term competitive advantages [11][16]. - The company has 43 million loyalty program members, who contribute to 95% of sales, providing valuable data for strategic planning [13]. - The current stock price presents a significant buying opportunity for value investors looking for undervalued stocks [11].