For this question we will be using P/E ratio.
To find a company’s P/E ratio, use www.morningstar.com , enter the desired stock symbol and request a basic quote. Once you have the basic quote, the P/E ratio is listed on a front page.
- Compare the P/E ratio of your company with the industry average or with major competitors.
ULTA Beauty P/E Ratio 32.39
Competitors
Nordstrom 13.20
Amazon 91.11
Sally Beauty Holdings Inc. 34.87
e.l.f. Beauty Inc. 39.09
- Is there a difference between these numbers?
Generally, a high P/E ratio means that investors are anticipating higher growth in the future. The average market P/E ratio is 20-25 times earnings. I would also like to note that companies that do not have a P/E ratio are losing money. From my observations, it appears that ULTA Beauty Inc., has a hopeful future as it pertains to growth compared to its competitor listed on Morningstar.com (Amazon). - Is the stock overvalued, undervalued, or properly valued? Why? In accordance with your findings, is it reasonable to buy the stock? Please explain your answers.
ULTA Beauty Inc., stock is valued properly at this time. According to MartketWatch.com, the company’s stock price has surged 42% so far this year as of close Tuesday, April 15, 2019, after falling 12% in 2017 and rising 9.5% in 2018. Monday, April 14, 2019, the stock rose to its highest intraday level yet, $353.78. From my analysis, I would say that it is reasonable to buy ULTA stock because they still have room to grow. We are barely into 2019 and the company has shown surprising growth since December 2018 when the stock declined to $224.
Instructions:
DO NOT repeat the answers, in one paragraph give comprehensive value added comment.