ULTA – The launch of advanced and organic beauty products to satisfy changing consumer preferences and benefit from rising consumer spending could help beauty companies generate substantial revenues in the coming months. Therefore, we think it could be wise to bet now on established players in this space Ulta Beauty (ULTA), Nu Skin (NUS), and Sally Beauty (SBH) now. Read on.
Jan 6, 2022
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Solid progress on the COVID-19 vaccination front, the lifting of travel restrictions, and resumption of outdoor activities have helped the beauty products industry rebound from its pandemic lows. Also, consumers’ growing interest in natural, organic, and chemical-free skincare, makeup, haircare and fragrance products and emerging beauty trends have incentivized beauty companies to launch new beauty products. The global beauty products industry is expected to grow at a 4.8% CAGR to $716 billion by 2025.
Despite increasing inflationary pressures, rising discretionary spending this festive season, efficient delivery services, and investments in brand promotions and advertising should help beauty companies profit substantially.
Given this backdrop, we think prominent beauty stocks Ulta Beauty, Inc. (ULTA), Nu Skin Enterprises, Inc. (NUS), and Sally Beauty Holdings, Inc. (SBH) could be solid bets now.
Ulta Beauty, Inc. (ULTA)
ULTA is a beauty retailer that sells cosmetics, fragrances, haircare and skincare products, salon services, and related accessories and services. The Bolingbrook, Ill.-based company distributes its products through its website and mobile applications. As of Jan. 30, 2021, the company operated 1,264 retail stores across 50 states.
On Nov.2, 2021, ULTA partnered with DoorDash (DASH), the nation’s leading last-mile logistics platform, to offer same-day delivery from select ULTA stores with plans to expand and roll out more broadly in 2022. ULTA is looking forward to benefiting during the holiday season.
For its fiscal third quarter, ended Oct.30, 2021, ULTA’s net sales increased 28.6% year-over-year to $2 billion. The company’s gross profit came in at $789.47 million, representing a 44.7% rise from the prior-year period. ULTA’s 284.24 million in operating income for the quarter represents a 180.7% rise from the year-ago period. While its net income increased 187.8% year-over-year to $215.29 billion, its EPS increased 198.5% to $3.94. As of October 30, 2021, the company had $605.05 million in cash and cash equivalents.
Analysts expect the company’s EPS to increase 268% year-over-year to $17.15 in the current year. The $8.59 billion consensus revenue estimate for the current year represents a 39.6% rise from the prior-year period. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. ULTA’s EPS is expected to grow at a 62% rate per annum over the next five years. The stock has gained 43.2% in price over the past year to close yesterday’s trading session at $401.49.
ULTA’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and a B grade for Growth and Sentiment. Click here to see the additional ratings for ULTA’s Value, Stability, and Momentum. ULTA is ranked #19 of 46 stocks in the B-rated Specialty Retailers industry.
Nu Skin Enterprises, Inc. (NUS)
NUS in Provo, Utah, develops and distributes personal care and wellness products worldwide. The company engages in the research and product development of skincare products and nutritional supplements. It promotes and sells its products directly and through distributors and websites.
On Nov.10, 2021, NUS acquired Mavely, a social commerce platform that streamlines customer acquisition and social selling. This acquisition is expected to bring new social selling capabilities to NUS’ brand affiliates. Mavely’s proprietary technology should help NUS improve its shopping experience and accelerate its global social commerce market.
NUS had $282.41 million in cash and equivalents as of Sept. 30, 2021. The $3.97 consensus EPS estimate for fiscal 2021 represents a 9.4% rise from the prior-year period. NUS surpassed the consensus EPS estimates in each of the trailing four quarters. A $2.68 billion consensus revenue estimate for the current year indicates a 3.8% year-over-year improvement. Analysts expect the company’s EPS to grow at a 6.8% rate per annum over the next five years. Over the past three months, the stock has gained 29.7% in price and ended yesterday’s trading session at $53.29.
It is no surprise that NUS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Value and an A grade Quality. Click here to see the additional ratings for NUS (Growth, Stability, Momentum, and Sentiment). The stock is ranked #4 of 9 stocks in the A-rated Medical – Consumer Goods industry.
Sally Beauty Holdings, Inc. (SBH)
SBH operates as a specialty retailer and distributor of professional beauty supplies. As of September 30, 2021, the company operated 4,777 stores. The company distributes its products through full-service/exclusive distributors, open-line distributors, direct sales, and mega-salon stores. SBH is headquartered in Denton, Tex.
On Dec.13, 2021, SBH announced a partnership with DoorDash (DASH), the nation’s leading last-mile logistics platform, to offer products from its stores. Powered exclusively through DoorDash Drive, DASH’s white-label fulfillment platform, SBH is looking forward to benefiting this holiday season by offering customers free two-hour delivery on all SallyBeauty.com orders for December.
For its fiscal fourth quarter, ended Sept.30, 2021, SBH’s total net sales increased 3.4% year-over-year to $990.26 million. The company’s adjusted net earnings came in at $73.11 million, representing a 3.4% rise from the prior year. Its adjusted EPS was $0.64, up 1.6% from the year-ago period. SBH had $400.96 million in cash and equivalents as of Sept. 30, 2021.
Analysts expect the company’s EPS to be $2.59 for the current year, representing a 7.9% rise from the prior-year period. It surpassed consensus EPS estimates in each of the trailing four quarters. A $4 billion consensus revenue estimate for the current year indicates a 3.3% year-over-year improvement. SBH’s EPS is expected to grow at a 29.9% rate per annum over the next five years. Over the past year, the stock has gained 45.8% in price to close yesterday’s trading session at $18.68.
SBH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has an A grade for Quality, and a B grade for Value. Click here to see the additional ratings for SBH’s Growth, Momentum, Stability, and Sentiment. Of the 46 stocks, SBH is ranked #10 in the B-rated Specialty Retailers industry.
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ULTA shares were unchanged in premarket trading Thursday. Year-to-date, ULTA has declined -2.63%, versus a -1.39% rise in the benchmark S&P 500 index during the same period.
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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