ULTA

We rate Ulta Beauty, Inc. (ULTA) as a Hold with a composite score of 63.7/100 at a current price of $687.31. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (88th percentile) and stability (75th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (23th percentile) and value (50th percentile) tempers our overall conviction. We assign a Narrow Moat rating (64/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Ulta Beauty, Inc. holds an above-average position (#17 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 63.7/100 places it at rank #371 in our full 7,333-stock universe. With a $23.3B market capitalization, Ulta Beauty, Inc. operates at meaningful scale within the Retail Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 9% and favorable momentum (88th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 39% (+3.1pp vs sector) narrow to operating margins of 13% (+9.4pp vs sector) and net margins of 10.1%, yielding a gross-to-net conversion rate of 26%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $687.31, Ulta Beauty, Inc. is trading near fair value based on current fundamentals. Our value factor score of 50/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 27.2x (a 27% premium to the sector median of 21.4x), EV/EBITDA of 19.7x (at a premium), P/B of 11.6x, P/S of 2.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to Ulta Beauty, Inc.. The stock presents a balanced risk profile: significant leverage (155% debt-to-equity). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (155% debt-to-equity). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 75th percentile and quality factor at the 69th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (75th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Ulta Beauty, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 42.8%, and the balance sheet is managed within acceptable parameters (D/E: 155%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Ulta Beauty, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Ulta Beauty, Inc. receives a Hold rating with a composite score of 63.7/100 (rank #371 of 7,333). Our quantitative framework assigns a Narrow Moat (64/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 61/100.

Our analysis supports a neutral stance on Ulta Beauty, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.