Ulta Beauty, Inc.'s (NASDAQ:ULTA) large institutional owners must be happy as stock continues to impress, up 3.6% over the past week

By
Simply Wall St
Published
February 22, 2022
NasdaqGS:ULTA
Source: Shutterstock

To get a sense of who is truly in control of Ulta Beauty, Inc. (NASDAQ:ULTA), it is important to understand the ownership structure of the business. With 89% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained US$713m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 15%.

Let's delve deeper into each type of owner of Ulta Beauty, beginning with the chart below.

See our latest analysis for Ulta Beauty

ownership-breakdown
NasdaqGS:ULTA Ownership Breakdown February 22nd 2022

What Does The Institutional Ownership Tell Us About Ulta Beauty?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Ulta Beauty already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Ulta Beauty, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:ULTA Earnings and Revenue Growth February 22nd 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Ulta Beauty. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 11% of shares outstanding. For context, the second largest shareholder holds about 7.8% of the shares outstanding, followed by an ownership of 4.1% by the third-largest shareholder.

After doing some more digging, we found that the top 22 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Ulta Beauty

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Ulta Beauty, Inc. in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$75m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Ulta Beauty. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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