Ulta Salon, Cosmetics & Fragrance (NASDAQ: ULTA) sells
cosmetics, fragrances, haircare products, skincare products and related accessories through a chain of 283 specialty retail shops in 34 states. The stores also feature hair salon services, manicures, pedicures, massages, and other beauty and spa treatments. A company website offers over 21,000 prestige and mass beauty products. Macy's (NYSE: M) is a major competitor.
The firm pleased investors last week, when it reported Q2 EPS of six cents, a penny above the average Wall Street estimate. Revenues rose 24.3% (yr/yr) to $249.1 million. The CEO attributed success to the company's proven marketing strategy and the resilience of the beauty retailing category. Management also guided Q3 EPS to 8-10 cents (10 cent consensus), Q3 revenues to $259-$263 million ($258.80M consensus), FY09 EPS to 52-57 cents (54 cent consensus) and FY09 revenues to $1.12-$1.13 billion ($1.13B consensus).
ULTA shares
popped on the news and then passed into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys" and three "buys". Analysts expect a 25% average annual growth rate, through the next five years. The Price to Sales ratio (0.77), Sales Growth rate (24.30%), EPS Growth rate (-0.23 to 0.06 yr/yr) and Return on Equity (28.34%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 45% of the outstanding shares. Since going public last October, the stock has traded between $9.02 and $35.63. A stop-loss of $12.00 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in either of the stocks mentioned above.
Ray of light: U.S. temp worker hiring increased by 34k in October
Closing Bell: Bulls gutting bears (ATVI, EWBC, GE, JASO, ENZN, MCD)
Goldman Sachs CEO Lloyd Blankfein pulls a Jeff Skilling in an interview
