Future returns remain the main concern for investors. However, looking at past stock returns can also provide wisdom. This is because it can help you see what the company has and hasn’t accomplished, and how the stock price has responded. It is also important to compare the yield to an appropriate price reference.
When it comes to a familiar retail name, how rich is Ulta Beauty (NASDAQ:ULTA) created for shareholders over the last five years?
Five years ago, Ulta’s stock traded at around $267 per share and closed at over $415 on January 8. This equates to an appreciation of 57.6%. Your $5,000 investment would have grown to $7,878. Ulta Beauty shares do not pay dividends, so this is not factored into the return.
This looks impressive. But what would you have done if you had invested passively in an index like S&P500? The index returned 95.5%, including dividends, during this period. Therefore, your $5,000 investment would have grown to $9,776.
Ulta Beauty shares have fallen over the past year. Its growth has been rapid, but sales have been slow lately. People cut back on spending because they had to pay more for basics like food and rent.
Its fiscal third-quarter same-store sales (comps) rose just 0.6% in the period ended November 2, 2024. Most of the comps gain came from increased traffic, showing that shoppers are attracted to Ulta’s stores and website.
Ulta offers products such as cosmetics, skincare, and fragrances at different price points. That should help the company until inflationary pressures ease and consumers looking for cheaper items feel more comfortable spending money.
The stock trades at a price-to-earnings (P/E) ratio of 17, up from around 20 a year ago. That’s well below the S&P 500’s P/E multiple of 30. With the stock falling on cyclical concerns, five years from now, long-term investors may look back and be happy with the returns and wealth created .
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