On Friday, ULTA Beauty (NASDAQ:ULTA), a beauty retailer with an $18.5 billion market capitalization and "GREAT" financial health score according to InvestingPro, received an optimistic update from Raymond (NS:RYMD) James, with the firm raising its price target on the stock to $495 from $430 while maintaining an Outperform rating. This adjustment follows ULTA's announcement of a stronger-than-anticipated financial performance in the third fiscal quarter.
The company's comparable sales increased by 0.6% year-over-year, surpassing both Raymond James's estimate of a 2.5% decline and the consensus expectation of a 2% drop. With a robust return on equity of 55% and currently trading below its Fair Value, ULTA demonstrates strong operational efficiency. (InvestingPro subscribers have access to 6 additional key insights about ULTA's performance and valuation metrics.)
ULTA reported earnings per share (EPS) of $5.14, which significantly exceeded the consensus estimate of $4.53. This was partly attributed to a deceleration in operating margin declines to -50 basis points year-over-year, an improvement after facing triple-digit declines in the first half of the year.
The analyst from Raymond James highlighted several factors contributing to the company's positive trajectory, including product innovation, more effective promotions, and a stabilization in shrink, which collectively may lead to a quicker recovery in fiscal year 2025.
In response to ULTA's third-quarter performance, Raymond James revised its EPS estimates for fiscal years 2024 and 2025 to $23.75 and $23.65, respectively. The raised price target of $495 is based on a target enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 14 times, compared to the current EV/EBITDA of 11.2x.
Trading at a P/E ratio of 15.75x and maintaining a healthy current ratio of 1.76, ULTA shows strong fundamentals. The firm reiterated its Outperform rating, signaling confidence in ULTA's ability to continue its positive momentum into the upcoming fiscal years. For a comprehensive analysis of ULTA's valuation and financial metrics, access the detailed Pro Research Report available on InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.