Intrinsic value of Ulta Beauty, Inc. - ULTA

Previous Close

$354.62

  Intrinsic Value

$194.50

stock screener

  Rating & Target

sell

-45%

Previous close

$354.62

 
Intrinsic value

$194.50

 
Up/down potential

-45%

 
Rating

sell

We calculate the intrinsic value of ULTA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 21.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.20
  15.08
  14.07
  13.16
  12.35
  11.61
  10.95
  10.36
  9.82
  9.34
  8.91
  8.51
  8.16
  7.85
  7.56
  7.31
  7.08
  6.87
  6.68
  6.51
  6.36
  6.23
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.59
  5.53
Revenue, $m
  6,838
  7,870
  8,977
  10,159
  11,413
  12,739
  14,134
  15,598
  17,130
  18,729
  20,397
  22,134
  23,941
  25,819
  27,772
  29,801
  31,910
  34,101
  36,379
  38,749
  41,214
  43,780
  46,451
  49,235
  52,137
  55,163
  58,320
  61,616
  65,058
  68,654
Variable operating expenses, $m
  5,915
  6,807
  7,765
  8,787
  9,872
  11,019
  12,226
  13,492
  14,817
  16,201
  17,644
  19,146
  20,709
  22,334
  24,023
  25,778
  27,602
  29,497
  31,468
  33,518
  35,650
  37,869
  40,180
  42,588
  45,098
  47,716
  50,447
  53,298
  56,275
  59,386
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  5,915
  6,807
  7,765
  8,787
  9,872
  11,019
  12,226
  13,492
  14,817
  16,201
  17,644
  19,146
  20,709
  22,334
  24,023
  25,778
  27,602
  29,497
  31,468
  33,518
  35,650
  37,869
  40,180
  42,588
  45,098
  47,716
  50,447
  53,298
  56,275
  59,386
Operating income, $m
  923
  1,062
  1,212
  1,371
  1,541
  1,720
  1,908
  2,106
  2,312
  2,528
  2,754
  2,988
  3,232
  3,486
  3,749
  4,023
  4,308
  4,604
  4,911
  5,231
  5,564
  5,910
  6,271
  6,647
  7,038
  7,447
  7,873
  8,318
  8,783
  9,268
EBITDA, $m
  1,178
  1,355
  1,546
  1,749
  1,965
  2,194
  2,434
  2,686
  2,950
  3,225
  3,512
  3,811
  4,123
  4,446
  4,782
  5,132
  5,495
  5,872
  6,265
  6,673
  7,097
  7,539
  7,999
  8,478
  8,978
  9,499
  10,043
  10,610
  11,203
  11,822
Interest expense (income), $m
  0
  0
  10
  21
  32
  44
  58
  71
  86
  101
  117
  134
  151
  169
  188
  208
  228
  249
  271
  294
  317
  342
  368
  394
  422
  451
  481
  513
  546
  580
  616
Earnings before tax, $m
  923
  1,052
  1,191
  1,339
  1,496
  1,662
  1,837
  2,020
  2,211
  2,411
  2,620
  2,837
  3,063
  3,298
  3,542
  3,795
  4,059
  4,333
  4,617
  4,914
  5,222
  5,542
  5,876
  6,224
  6,587
  6,965
  7,360
  7,772
  8,203
  8,652
Tax expense, $m
  249
  284
  322
  362
  404
  449
  496
  545
  597
  651
  707
  766
  827
  890
  956
  1,025
  1,096
  1,170
  1,247
  1,327
  1,410
  1,496
  1,587
  1,681
  1,779
  1,881
  1,987
  2,099
  2,215
  2,336
Net income, $m
  674
  768
  870
  978
  1,092
  1,213
  1,341
  1,474
  1,614
  1,760
  1,913
  2,071
  2,236
  2,407
  2,585
  2,771
  2,963
  3,163
  3,371
  3,587
  3,812
  4,046
  4,290
  4,544
  4,809
  5,085
  5,373
  5,674
  5,988
  6,316

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,380
  3,890
  4,437
  5,022
  5,642
  6,297
  6,987
  7,710
  8,467
  9,258
  10,083
  10,941
  11,834
  12,763
  13,728
  14,731
  15,773
  16,857
  17,983
  19,154
  20,373
  21,641
  22,962
  24,338
  25,772
  27,268
  28,828
  30,458
  32,159
  33,937
Adjusted assets (=assets-cash), $m
  3,380
  3,890
  4,437
  5,022
  5,642
  6,297
  6,987
  7,710
  8,467
  9,258
  10,083
  10,941
  11,834
  12,763
  13,728
  14,731
  15,773
  16,857
  17,983
  19,154
  20,373
  21,641
  22,962
  24,338
  25,772
  27,268
  28,828
  30,458
  32,159
  33,937
Revenue / Adjusted assets
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
  2.023
Average production assets, $m
  1,272
  1,464
  1,670
  1,890
  2,123
  2,369
  2,629
  2,901
  3,186
  3,484
  3,794
  4,117
  4,453
  4,802
  5,166
  5,543
  5,935
  6,343
  6,767
  7,207
  7,666
  8,143
  8,640
  9,158
  9,697
  10,260
  10,848
  11,461
  12,101
  12,770
Working capital, $m
  759
  874
  996
  1,128
  1,267
  1,414
  1,569
  1,731
  1,901
  2,079
  2,264
  2,457
  2,657
  2,866
  3,083
  3,308
  3,542
  3,785
  4,038
  4,301
  4,575
  4,860
  5,156
  5,465
  5,787
  6,123
  6,474
  6,839
  7,221
  7,621
Total debt, $m
  184
  383
  596
  824
  1,066
  1,321
  1,590
  1,873
  2,168
  2,476
  2,798
  3,133
  3,481
  3,843
  4,220
  4,611
  5,017
  5,440
  5,879
  6,336
  6,811
  7,305
  7,821
  8,357
  8,917
  9,500
  10,109
  10,744
  11,408
  12,101
Total liabilities, $m
  1,318
  1,517
  1,731
  1,958
  2,200
  2,456
  2,725
  3,007
  3,302
  3,611
  3,932
  4,267
  4,615
  4,978
  5,354
  5,745
  6,152
  6,574
  7,013
  7,470
  7,945
  8,440
  8,955
  9,492
  10,051
  10,634
  11,243
  11,878
  12,542
  13,235
Total equity, $m
  2,062
  2,373
  2,707
  3,063
  3,441
  3,841
  4,262
  4,703
  5,165
  5,648
  6,150
  6,674
  7,219
  7,785
  8,374
  8,986
  9,622
  10,283
  10,970
  11,684
  12,427
  13,201
  14,007
  14,846
  15,721
  16,633
  17,585
  18,579
  19,617
  20,701
Total liabilities and equity, $m
  3,380
  3,890
  4,438
  5,021
  5,641
  6,297
  6,987
  7,710
  8,467
  9,259
  10,082
  10,941
  11,834
  12,763
  13,728
  14,731
  15,774
  16,857
  17,983
  19,154
  20,372
  21,641
  22,962
  24,338
  25,772
  27,267
  28,828
  30,457
  32,159
  33,936
Debt-to-equity ratio
  0.090
  0.160
  0.220
  0.270
  0.310
  0.340
  0.370
  0.400
  0.420
  0.440
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.540
  0.550
  0.550
  0.560
  0.560
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
Adjusted equity ratio
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610
  0.610

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  674
  768
  870
  978
  1,092
  1,213
  1,341
  1,474
  1,614
  1,760
  1,913
  2,071
  2,236
  2,407
  2,585
  2,771
  2,963
  3,163
  3,371
  3,587
  3,812
  4,046
  4,290
  4,544
  4,809
  5,085
  5,373
  5,674
  5,988
  6,316
Depreciation, amort., depletion, $m
  254
  293
  334
  378
  425
  474
  526
  580
  637
  697
  759
  823
  891
  960
  1,033
  1,109
  1,187
  1,269
  1,353
  1,441
  1,533
  1,629
  1,728
  1,832
  1,939
  2,052
  2,170
  2,292
  2,420
  2,554
Funds from operations, $m
  928
  1,061
  1,204
  1,356
  1,517
  1,687
  1,867
  2,055
  2,252
  2,457
  2,671
  2,894
  3,126
  3,368
  3,619
  3,879
  4,150
  4,431
  4,724
  5,028
  5,345
  5,675
  6,018
  6,375
  6,748
  7,137
  7,542
  7,966
  8,408
  8,870
Change in working capital, $m
  106
  114
  123
  131
  139
  147
  155
  162
  170
  178
  185
  193
  201
  209
  217
  225
  234
  243
  253
  263
  274
  285
  297
  309
  322
  336
  350
  366
  382
  399
Cash from operations, $m
  822
  947
  1,081
  1,224
  1,378
  1,540
  1,712
  1,892
  2,081
  2,279
  2,486
  2,702
  2,926
  3,159
  3,402
  3,654
  3,916
  4,188
  4,471
  4,765
  5,071
  5,390
  5,721
  6,066
  6,426
  6,801
  7,192
  7,600
  8,026
  8,471
Maintenance CAPEX, $m
  -219
  -254
  -293
  -334
  -378
  -425
  -474
  -526
  -580
  -637
  -697
  -759
  -823
  -891
  -960
  -1,033
  -1,109
  -1,187
  -1,269
  -1,353
  -1,441
  -1,533
  -1,629
  -1,728
  -1,832
  -1,939
  -2,052
  -2,170
  -2,292
  -2,420
New CAPEX, $m
  -175
  -192
  -206
  -220
  -233
  -247
  -260
  -272
  -285
  -298
  -310
  -323
  -336
  -349
  -363
  -377
  -392
  -408
  -424
  -441
  -459
  -477
  -497
  -518
  -540
  -563
  -587
  -613
  -640
  -669
Cash from investing activities, $m
  -394
  -446
  -499
  -554
  -611
  -672
  -734
  -798
  -865
  -935
  -1,007
  -1,082
  -1,159
  -1,240
  -1,323
  -1,410
  -1,501
  -1,595
  -1,693
  -1,794
  -1,900
  -2,010
  -2,126
  -2,246
  -2,372
  -2,502
  -2,639
  -2,783
  -2,932
  -3,089
Free cash flow, $m
  428
  500
  582
  671
  766
  869
  978
  1,094
  1,216
  1,345
  1,479
  1,620
  1,766
  1,919
  2,078
  2,243
  2,415
  2,594
  2,779
  2,971
  3,171
  3,379
  3,596
  3,821
  4,055
  4,299
  4,553
  4,818
  5,094
  5,382
Issuance/(repayment) of debt, $m
  184
  199
  213
  228
  242
  256
  269
  282
  295
  308
  322
  335
  348
  362
  376
  391
  406
  422
  439
  457
  475
  495
  515
  537
  559
  583
  609
  635
  664
  693
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  184
  199
  213
  228
  242
  256
  269
  282
  295
  308
  322
  335
  348
  362
  376
  391
  406
  422
  439
  457
  475
  495
  515
  537
  559
  583
  609
  635
  664
  693
Total cash flow (excl. dividends), $m
  612
  699
  795
  898
  1,008
  1,125
  1,247
  1,376
  1,512
  1,653
  1,801
  1,955
  2,115
  2,281
  2,455
  2,635
  2,822
  3,016
  3,218
  3,428
  3,647
  3,874
  4,111
  4,357
  4,614
  4,882
  5,161
  5,453
  5,757
  6,075
Retained Cash Flow (-), $m
  -288
  -311
  -334
  -356
  -378
  -400
  -421
  -441
  -462
  -482
  -503
  -524
  -545
  -566
  -589
  -612
  -636
  -661
  -687
  -714
  -743
  -774
  -806
  -839
  -875
  -912
  -952
  -994
  -1,038
  -1,084
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  324
  388
  461
  542
  630
  725
  827
  935
  1,050
  1,171
  1,298
  1,431
  1,570
  1,715
  1,866
  2,023
  2,186
  2,355
  2,531
  2,714
  2,903
  3,100
  3,305
  3,518
  3,739
  3,970
  4,209
  4,459
  4,719
  4,991
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  311
  355
  402
  446
  488
  526
  558
  584
  603
  614
  616
  611
  597
  576
  548
  514
  476
  434
  390
  345
  300
  257
  217
  179
  145
  116
  90
  69
  52
  38
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Ulta Beauty, Inc. is a holding company for the Ulta Beauty group of companies. The Company is a beauty retailer. The Company offers cosmetics, fragrance, skin, hair care products and salon services. The Company offers approximately 20,000 products from over 500 beauty brands across all categories, including the Company’s own private label. The Company also offers a full-service salon in every store featuring hair, skin and brow services. The Company operates approximately 970 retail stores across over 48 states and the District of Columbia and also distributes its products through its Website, which includes a collection of tips, tutorials and social content. The Company offers makeup products, such as foundation, face powder, concealer, color correcting, face primer, blush, bronzer, contouring, highlighter, setting spray, shampoos, conditioners, hair styling products, hair styling tools and perfumes. The Company also offers makeup brushes and tools, and makeup bags and cases.

FINANCIAL RATIOS  of  Ulta Beauty, Inc. (ULTA)

Valuation Ratios
P/E Ratio 53.7
Price to Sales 4.5
Price to Book 14.2
Price to Tangible Book
Price to Cash Flow 34.7
Price to Free Cash Flow 84.4
Growth Rates
Sales Growth Rate 23.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25.1%
Cap. Spend. - 3 Yr. Gr. Rate 10.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 17.1%
Ret/ On Assets - 3 Yr. Avg. 15.6%
Return On Total Capital 27.4%
Ret/ On T. Cap. - 3 Yr. Avg. 24.7%
Return On Equity 27.4%
Return On Equity - 3 Yr. Avg. 24.7%
Asset Turnover 2
Profitability Ratios
Gross Margin 36%
Gross Margin - 3 Yr. Avg. 35.4%
EBITDA Margin 17.8%
EBITDA Margin - 3 Yr. Avg. 17.2%
Operating Margin 13.5%
Oper. Margin - 3 Yr. Avg. 13%
Pre-Tax Margin 13.5%
Pre-Tax Margin - 3 Yr. Avg. 13%
Net Profit Margin 8.4%
Net Profit Margin - 3 Yr. Avg. 8.2%
Effective Tax Rate 37.5%
Eff/ Tax Rate - 3 Yr. Avg. 37.3%
Payout Ratio 0%

ULTA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ULTA stock intrinsic value calculation we used $5885 million for the last fiscal year's total revenue generated by Ulta Beauty, Inc.. The default revenue input number comes from 0001 income statement of Ulta Beauty, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ULTA stock valuation model: a) initial revenue growth rate of 16.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ULTA is calculated based on our internal credit rating of Ulta Beauty, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Ulta Beauty, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ULTA stock the variable cost ratio is equal to 86.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ULTA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Ulta Beauty, Inc..

Corporate tax rate of 27% is the nominal tax rate for Ulta Beauty, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ULTA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ULTA are equal to 18.6%.

Life of production assets of 4.3 years is the average useful life of capital assets used in Ulta Beauty, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ULTA is equal to 11.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1774.217 million for Ulta Beauty, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 59.307 million for Ulta Beauty, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Ulta Beauty, Inc. at the current share price and the inputted number of shares is $21.0 billion.

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