Is 48x earnings too pricey for Ulta?
Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) has seen its share prices rising at an accelerated pace since issuing Q3 2010 guidance. Ulta entered the long Memorial Day weekend on a two day upswing, rising 4.57% to $55.25. Ulta is now trading at $55.25, just under its 52 week high and has a P/E ratio of 47.63. The question on my mind is, will investors continue to be willing to pay the premium to own ULTA heading into an earnings call on June 6? I think they will.
ULTA?s P/E ratio is high for their industry, extremely high. Competitors Macy?s (M) and Regis (RGS) are trading at 12.98x and 30.26x earnings, respectively. The industry is trading at an average of 15.39x earnings. So why would investors pony up the extra money to own ULTA? Three reasons:
Positioning. Ulta has positioned themselves as the
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