Is It Time To Consider Buying Ulta Beauty, Inc. (NASDAQ:ULTA)?

Ulta Beauty, Inc. (NASDAQ:ULTA) led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Ulta Beauty’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Ulta Beauty

What Is Ulta Beauty Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 19% below our intrinsic value, which means if you buy Ulta Beauty today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $520.45, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Ulta Beauty’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Ulta Beauty look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -1.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ulta Beauty. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? ULTA seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ULTA for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ULTA should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Ulta Beauty and you'll want to know about this.

If you are no longer interested in Ulta Beauty, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.