Shares of Ulta Beauty(NASDAQ: ULTA) dipped on Friday after the company reported results for its fiscal fourth quarter after the closing bell Thursday, even though both the results and the guidance looked pretty good. As of 12:55 p.m. ET, Ulta Beauty stock was down by about 4.5%, but it had been off by as much as 11% earlier in the session.
Another beautiful year for Ulta
In its fiscal 2023 Q4, which ended on Feb. 3, Ulta Beauty exceeded management's guidance with net sales of more than $3.5 billion, a 10% year-over-year increase. Sales rose due to both the opening of new stores and a 2.5% increase in same-store sales.
Ulta Beauty's operating income for the quarter also came in strong at $517 million. This was up 15.5% from the prior-year period and boosted its fiscal-year operating income to $1.7 billion. Importantly, this gave the company a fiscal-year operating margin of 15%, better than the 14.8% that had been the top of its margin guidance range.
Granted, Ulta Beauty is guiding for slower sales growth and a small pullback in its operating margin in 2024. But things are still looking good for this beauty chain of nearly 1,400 locations.
Is Ulta Beauty stock a buy?
Ulta Beauty stock is up about 70% over the last three years, but I don't believe it's overvalued in the least. Based on the midpoint of management's guidance for 2024, the company should earn roughly $1.7 billion in operating income yet again. The company is valued at about 16 times this assumption, which is reasonable.
What's not factored into the assumptions is the possibility of management repurchasing stock. Ulta Beauty spent $1 billion on share buybacks in 2023, and management was just authorized to use $2 billion more to make additional repurchases. Depending on how quickly management acts and at what share prices, those buybacks could make a reasonably valued stock look quite cheap.
Therefore, Ulta Beauty is definitely a stock to consider after Friday's small pullback.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ulta Beauty. The Motley Fool has a disclosure policy.
