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Is Ulta Salon Stock Reasonably Priced After the Pop?

By Motley Fool Staff – Mar 23, 2016 at 9:43AM

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Excellent fundamental performance has juiced the company's share price.

The stock price of Ulta Salon Cosmetics & Fragrance (ULTA 1.09%) popped a very pleasant 17% after the company on March 10 reported same-store sales growth exceeding 12% in its Q4, among other very encouraging figures.

In this segment from the Motley Fool Money podcast, Ron Gross, Chris Hill, and Jeff Fischer discuss Ulta's superb fundamental performance of late, its stock price, and the timing of its share buyback program.

A transcript follows the video.

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This podcast was recorded on March 11, 2016. 

Chris Hill: Shares of Ulta Salon up 17% on Friday after same-store sales in the fourth quarter rose more than 12%. That's huge for them, isn't it, Ron?

Ron Gross: This is a firing-on-all-cylinders moment if I've ever seen one. This is really stellar results. I mean, the same-store sales -- online sales alone were up 44%. Gross margins up, operating margins up, earnings per share up 25%. They instituted an accelerated stock buyback with Goldman Sachs for $200 million worth of stock, authorized a total share buyback of $425 million, bought back 1 million shares in fiscal 2015. The company is just doing really, really well.

Hill: The stock is at an all-time high. Is now the time to be authorizing hundreds of millions of dollars worth of buybacks?

Gross: Low 30s P/E, 15 times EBITDA, so not cheap. But the growth rates are impressive. So, not ridiculously expensive, either.

Hill: So, just to recap, from your standpoint, Ulta Salon at an all-time high, still a much more reasonably priced stock than Shake Shack [laughs], which has been almost decimated.

Jeff Fischer: Still a buy. Let's check out Ulta a year from now.

Jeff Fischer has no position in any stocks mentioned. Ron Gross has no position in any stocks mentioned. Chris Hill has no position in any stocks mentioned. The Motley Fool recommends Ulta Salon, Cosmetics & Fragrance. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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