What happened

Shares of Ulta Beauty, Inc. (NASDAQ:ULTA) dipped last month after the beauty and salon chain failed to impress the market in its second-quarter earnings report. According to data from S&P Global Market Intelligence, the stock fell 12% in August.

Ulta actually delivered another strong quarter, but the results were not quite enough to keep up with investors' ever-increasing expectations. As the chart below shows, the stock slid for the first three weeks of the month and then dove on the earnings report, though it recovered some of those losses in the last few days of the month.

ULTA Chart

ULTA data by YCharts

So what

The beauty chain delivered another strong report with comparable sales jumping 11.7%, and overall sales up 20.6% to $1.29 billion. That figure matched analyst estimates, and added leverage to the bottom line as Ulta's operating margin expanded from 13.5% to 14%. Earnings per share jumped 28% to $1.83 as a result, which beat estimates at $1.78.

CEO Mary Dillon said the company "delivered another quarter of excellent performance with strong top line growth coupled with robust margin expansion. We accelerated our market share gains while continuing to reduce promotional intensity and increase personalized offers through our industry leading loyalty program."

The front of an Ulta Beauty store.

Image source: Ulta Beauty.

Now what

The sell-off seemed to have more to do with broader concerns in the beauty industry and about Ulta's valuation as last month's dip capped off a three-month-long slide that stripped nearly a third of the stock's valuation. Ulta's guidance for the current quarter also showed revenue growth slowing modestly to 18.7% based on a forecast of $1.33 billion to $1.35 billion. It also called for EPS of $1.63 to $1.68, compared to estimates at $1.68.

Ulta shares have begun to recover since the earnings report, which seems to be a sign that the valuation has become more reasonable. As it continues to put up comparable sales growth that almost no brick-and-mortar concept can match, the stock should return to its winning ways.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ulta Beauty. The Motley Fool has a disclosure policy.