Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA)

Everyone in the store is happy.

SS#17

Stockpickr insider buying 1 of 5.

P/B and insider sales trends convince me that the recent downtrend isn't just a "test of support" but the start of something major.

Book value is only $12.32, BTW. That's a long way tofall.

It is candy store for women. They have a great rewards program and frequent sales. They carry great product lines in one convenient area, appeal to all age groups, have fairly well trained sales staff, the stores are well staffes at all times. It's Nirvana for womens who wear make-up.

beaten down because of CEO exit.

Just realized I never added Ulta to CAPS! I pretty much doubled my position during last Friday's drop. CEO departure doesnt really concern me all that much, as he is not needed to continue the successful expansion plan. They have years and years of grow ahead. Expand without taking on debt, good cash flows. It becomes fairly easy to add to your existing holdings after you have followed a company over the years. You can then spot an opportunity and seize on it easily.

Plans on opening 125 stores this year and trades at a forward PE of 17 for 25-30% EPS growth. Plus when they find a CEO that will be a strong catalyst to push the stock back above 80.

It will spring back

The stock has been pummeled over the past couple of days. Below $85 represents a good buy in point for a company with a great long-term EPS growth rate and zero debt.

CEO leaving has exaggerated effect on the market. Been waiting for better entry point for this stock. Think this is it.

Ulta was entered into my caps at $87.82. The PE ratio was 36.59 - it isn't short-term cheap, but I think it will prove to be long-term cheap.

Some investors don’t like buying high PE stocks and they cite studies that show that low PE stocks outperform high PE stocks across all asset classes. I believe those studies are flawed due to the samples used. If we use all high PE stocks and all low PE stocks those studies are probably correct. But those, like me, that study long-term growth companies will be able with a high degree of accuracy choose between best of the best and the weaker growth stories. We can identify with a higher degree of accuracy sustainable and enduring growth stories and vastly outperform a selection of well selected low PE stocks, in my opinion.

I have owned ULTA since September of 2011. The price was $70.33 and the PE ratio was whopping 48.13. Today the PE on my original investment is 29.3, just barely on the right side of 30 even though the price is 42.6% higher. So, though I only owned the shares a bit less than a year, the PE has shrunk on my original investment so my margin of safety is increasing. My principal is much safer than when I first purchased it. I believe five years from now my margin of safety on my original purchase will be so high, even a recession won’t touch my principal and also leave some nice gains untouched. I consider ULTA a super stock in my portfolio and I believe it will be relevant for a very long time.

The CEO leaving in my opinion isn't a significant reason for the price to crash. The holiday preview report was excellent. Sales rose 23.2% which was higher than it rose last year when it increased 21%. Holiday same store sales were up 7.4%. they reconfirmed 4Q guidance of $0.96 to $0.98. Last year, they made $0.73.

Yes, there are risks, but I don’t think the business risk is that great. They could expand too fast, pick up debt and that would be bad, but so far they haven’t done that even though, they have expanded their store base rapidly. Presently, they have $191.7 million in cash and zero debt. We can easily see if they start to expand too quickly and endangering their balance sheet. So far this hasn’t been a problem.

But there is quotational risk, or the risk the price could go down because the markets go down or investors flee high PE stocks for a while. This does happen from time to time particularly if a recession looms or there is fear that the economy is weakening. If this happens, I am sure I will buy more.

Some investors would rather wait to buy them when the PE is less than 30 or less than 25 or less than 20. I watched investors wait on what was to become huge winners waiting for a price that Wall Street calls cheap. Warren Buffett warns if you wait for the robins to sing the spring will be over. I have seen my share of growth stocks trade regularly at low PE ratios after decades of growth and after they matured. If you wait for the robin to sing, spring could be long gone. I believe ULTA is a good long-term opportunity. Yes, the price could come down, if so great, we buy more at a better value point.

The Great recession hasn’t been too far gone. We are unlikely to get Great recession value points today without another recession. I don’t wait for recessions to invest, I ease into my companies at better and better value points which I believe will ensure my future regardless of what happens to the economy, barring a Mad Max scenario.

Another example: Investors could have purchased BWLD in the second and third quarters of 2005 at a price lower than the lowest price reached during the Great Recession that was about to occur just three years later. So when I identify a company that I believe have strong long-term growth prospects I don’t wait. I buy – I might buy smaller, but I buy some and then look to get more at better and better value points over time.

Why do I believe ULTA has a long-term future? Because I think they have a chance to create another very successful category killer for cosmetics and services. The services part is a significant component of their growth strategy and what will set them apart from Amazon and eventually build customer loyalty and product buying power.

Hoovers reports that there are about 65000 beauty shops in the U.S. ULTA will expand their smaller format store base in time to place them in markets they aren’t in now. That 1200 store U.S target may get raised over time if they are successful in expanding the service part of their business. I believe ULTA is a category killer in the making.

Sephora is a good competitor, but their stores are less than half the size of an average UlTA store and cannot offer the number of products or services that ULTA can offer. ULTA offers over 20,000 SKUs and is building a concept that will become very hard to duplicate in my opinion. They have the first mover advantage. ULTA only has about 2% of the beauty industry market.

They carry a number of products that are exclusive to their stores. A big part of their growth strategy is to pick up early on new beauty product trends and bring them to their stores, sometimes in exclusive deals. Investors may drop the ball if they think of ULTA as simply a cosmetic store.

2014 EPSe is 3.41. $85 represents 25x of that.

Historically speaking, for ULTA, forth quarter tends to be the most profitable quarter of the year.
https://eresearch.fidelity.com/eresearch/evaluate/fundamentals/earnings.jhtml?symbols=ULTA

Recent pullback in share price seems like an excellent opportunity to buy if one expects for this company to continue its steady growth trajectory. Remarkably, ULTA has no debt to speak of.

... "For the fourth quarter, Ulta expects earnings per share between 96–98 cents, significantly higher than 73 cents in the year-earlier quarter. Net sales are estimated in the range of $742–$754 million based on comparable store sales growth of 5% to 7%. For fiscal 2012, the company projects earnings per share in the range of $2.64–$2.66." ... source:
http://www.zacks.com/stock/news/89937/ultas-holiday-season-sales-soar

Here are some "Key Statistics" compared to other "specialty retailers" (an imprecise aggregate comparison) :
https://eresearch.fidelity.com/eresearch/evaluate/fundamentals/keyStatistics.jhtml?stockspage=keyStatistics&symbols=ULTA

If one wants to compare (with better precision) to another, specific, stock of choice or up to four more ticker symbols simultaneously, Fidelity has a great (free) tool for that as well:
https://research2.fidelity.com/fidelity/screeners/commonstock/comparison.asp?symbols=ULTA
One can compare on any one choice of metrics:

Key Statistics
Dividends
Valuation
Performance & Volatility
Growth
Profitability
Cash & Debt
Ownership & Trading Characteristics
Intraday Price & Volume

https://research2.fidelity.com/fidelity/screeners/commonstock/comparison.asp?symbols=ULTA
(look at right portion of the linked site > drop down menu titled: "Key Statistics" - That is where one can change the metrics of comparison)

Excellent value proposition + customer base that's willing and able to spend + management team focused on the customer experience = long-term winner.

Gabbing Tom E's coat tails on this one. How can I go wrong.

This fast-growing retail chain is becoming the go-to place for 14-50 year old females for cosmetics and health & beauty products.

Too easy

domestic US, EPS growth