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Fool UK
Recs
So many reasons: Discretionary Item=Economy; Poor Cash flow. Less than $3M in the bank. Three straight quarters of borrowing, (who is loaning these people money?). Inventory up 40% in a year. Acct's payable rising rapidly, (despite borrowing). Final Reason: Something smells at ULTA.
I agree with your analysis:- negative cash flow last year: -35 million- current ratio of 2.54 and quick ratio of only 0.54 indicating that they have huge inventory.- Days sales of inventory is close to 100 - for a company that sells fashion products high inventory could lead to obsolescence
Glad to see others wondering. What justifies the recent run up on this stock? Is something going on? I've liked it in the past, but this valuation puzzles me.
Now that the economy is showing signs of recover there seems to be a fascination for anything that was beaten down. Those who missed the March to July snap back are trying to play catchup. Pretty much anything with or without a positive P/E is snapping back to at least half of what it was two years ago. Ulta is better off than most with positive earnings the entire recession. I'm not sure how much damage was done with the cuts they had to do, but overall they seem to be resistive to the worse of the economy.
Maybe it's a growth company?
I closed this one a year ago when the recession showed that it had no long lasting effects and when I learned about the "lip stick" story. Never bet against cosmetics, even in a recession. Ultra has shown good resilancy and is definitely a growth story, although I tend to stay away from retail. Good luck.