Ulta Beauty (ULTA -0.56%) just passed a huge milestone. The spa and beauty products retailer crossed $10 billion in annual sales in fiscal 2022 even as profitability expanded for a second straight year.

These wins have helped propel the retailer's stock returns far above the market over the past year. But is Ulta Beauty just getting started? Let's take a closer look.

Excellent momentum

Ulta Beauty's 2022 results make it a standout compared to most of its retailing peers. Revenue rose 18% to $10.2 billion thanks to the combination of strong demand, rising prices, and an expanding store base. Ulta's same-store sales were up a blazing 16% -- on top of the 38% spike in the prior year. Compare that result to Target (NYSE: TGT), which grew by 2.2% and 12.7% in 2022 and 2021, respectively.

Ulta benefited from the fact that consumers remain interested in beauty and skin care products even as they scaled back spending in other areas last year, primarily consumer discretionary purchases. The retailer is winning market share in that expanding niche, though, partly thanks to an effective merchandising strategy.

Earning more money

Ulta isn't struggling under the weight of rising costs, either. Gross profit margin rose for a second consecutive year, improving to 40% of sales in 2022 from 39% of sales in 2021. That success suggests pricing power in an inflationary market.

TGT Operating Margin (TTM) Chart

TGT Operating Margin (TTM) data by YCharts

Operating income jumped to 16.1% of sales from 15%, too. For context, Target's comparable figure fell to 4% from 8% in 2022. "These milestone achievements demonstrate the power of Ulta Beauty's differentiated model," CEO Dave Kimbell said in a press release.

Outlook and value

Investors have good reason to expect this positive momentum to continue. Ulta Beauty issued a conservative outlook for 2023 that still calls for comps to rise by 4% to 5%. Most other national retailers are projecting flat results or modest declines this year following several years of strong growth. Ulta Beauty's traffic gains will be boosted by the addition of around 30 new stores.

Ulta had launched over 40 new locations in each of the last two years, and that slower expansion pace is another metric that suggests more caution by the management team as economic growth rates decelerate. Another is the fact that operating income is likely to fall from 16.1% in 2022 to between 14.7% and 15% this year. Yet, Ulta is still on track to generate industry-thumping revenue and earnings growth in 2023.

Investors will have to pay a premium to own such a high-performing stock. Ulta's shares are valued at 2.8 times sales compared to Target's P/S ratio of 0.7. Even Tractor Supply, another retailing winner, is valued at a cheaper 1.8 times sales.

Its elevated valuation suggests that investors might want to watch this stock for now. Ulta shares are priced as if sales growth and profit margins will remain at these elevated levels for several years. The stock has earned a premium thanks to Ulta's great execution through a tricky selling environment. But investors might prefer to wait for a cheaper price before buying into this impressive growth story.