In this segment of the Motley Fool Money podcast, host Chris Hill is joined by Million Dollar Portfolio's Jason Moser, Hidden Gems Canada's David Kretzmann, and Motley Fool Pro and Options' Jeff Fischer to consider Ulta Beauty's (NASDAQ:ULTA) fiscal fourth-quarter report, which featured eye-popping 9% comps growth, though profits were a bit low. Investors did bid the price up, but the Fools have the sense that even that sterling report didn't fully please Wall Street. They talk about what Ulta has done right, what its success says about the future of retail, and the company's growth path.

A full transcript follows the video.

This video was recorded on March 16, 2018.

Chris Hill: Ulta Beauty up 7% on Friday after its fourth quarter report. Profit came in a little low, but same-store sales, David, up nearly 9%. And even that seemed like Wall Street was looking for an even higher number. I mean, most retailers would kill for 9% comps!

David Kretzmann: Yeah, it's really staggering. Sometimes the market is just weird, Chris. That's my summary there. But I think Ulta is really laying out the roadmap for retailers in this age of Amazon. They're investing in omni-channel, so both the in-store experience and their e-commerce sales, which made up 11% of total sales in 2017, which, they got to that hurdle a couple years faster than they anticipated. They thought they would get there in 2020. They have in-store services like the salon and skin care and hair care. 

And they're doing all of this without a lick of debt. This past year, even as their opening stores, they still generated over $330 million in free cash flow. They don't have any debt, they have almost $400 million in cash on the balance sheet. Overall just in a very solid position. And this is a company that will really benefit from this new tax bill. They're only in the U.S., so they'll see their tax rate drop from about 35% to 25%. So, taking that new tax bill into account, that alone will boost their earnings this year probably by about 20%, let alone with all these other initiatives they have.

Jason Moser: The one question I have with Ulta, we've seen where retailers can get into a lot of trouble building out that physical presence too quickly. And I know Ulta recently raised that guidance to add a few more hundred stores to their overall base. I just can't help but wonder if that might be a little bit too aspirational.

Kretzmann: Yeah, right now they're still not at 1,100 stores. I think they're targeting somewhere between 1,300 and 1,500 stores. I think that's a good point. Maybe they focus on boosting those internet sales, which up until this point, they've mentioned that the sales coming through e-commerce haven't really been cannibalizing the store sales. So, I think that's a good point with these retailers that maybe are getting a little bit close to that saturation point, you might want to tamper the expectations a little bit.

Jeff Fischer: David, you mentioned earnings per share might grow more than 20% this year, year over year. The stock right now trades at about 19X expected earnings for the year. So on that measure, if that growth can continue anywhere near that rate, shares look pretty reasonable, you might say.

Kretzmann: Yeah, I think the valuation looks reasonable. That 20% growth will just be from the tax tailwinds of that new tax bill. And the company as a whole already without those tax benefits is growing over 20%. So, it should be a good year this year for Ulta.

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