Ulta’s (ULTA) latest results show strength in beauty demand despite a tight consumer backdrop.
Ulta delivered another standout quarter, lifting its outlook and sending shares to new highs. With beauty spending proving resilient, investors are asking whether ULTA still ranks among the best stocks to buy.
Key Points
- Ulta posted its strongest revenue growth in nearly three years and raised full-year guidance.
- Beauty demand remains resilient while loyalty membership and digital engagement hit records.
- Valuation metrics suggest the stock may be pricing in a lot of optimism.
Ulta’s Big Q3 Beat: What Drove the Momentum
Ulta Beauty surged after reporting a powerful Q3, with revenue rising 12.9% to $2.86 billion and EPS of $5.14—both well above expectations. Comparable sales rose 6.3%, supported by higher average ticket sizes and more transactions. Beauty categories posted broad-based gains, led by double-digit growth in fragrance and strong results in skincare.
Management acknowledged consumer confidence softened during the quarter, yet beauty engagement remained healthy. The company's mix of prestige and mass-market offerings helped keep shoppers coming back, while e-commerce delivered double-digit growth.
Ulta also continues to expand internationally, opening stores in Mexico and launching its first Middle East location. This adds a fresh growth pipeline beyond the already strong U.S. business.
Is ULTA Still a Good Investment After the Surge?
Over the last five years, ULTA has returned 101%, significantly rewarding long-term investors. Despite a modest 0.9% dip this past week, shares remain up nearly 25% over the past year.
However, valuation is now a key talking point. Ulta scores 1 out of 6 on undervaluation checks, and its DCF estimate suggests shares may be about 48.8% overvalued. Put simply, the market seems to be pricing in a lot of good news after years of steady execution.
Ulta trades around 19.9× earnings, slightly above the specialty retail average but well below broader beauty peers. Even so, it sits above its “Fair Ratio” estimate of 16.9×, implying expectations may be running ahead of fundamentals.
What Should Investors Watch Next?
Management signaled a more moderate pace of expense growth ahead, especially after a heavy investment year in 2025. Higher staffing, incentive pay, and technology investments pushed SG&A up over 23%, weighing on operating margins.
Still, Ulta’s digital engine is firing: mid-teens online growth, 65% of online member transactions through the app, and stronger adoption of new features like Replenish & Save and split carts.
Exclusive product launches—including Beyoncé-backed Sacred haircare and Fenty Skin Body—continue to draw new shoppers. The loyalty program reached a record 46.3 million members, demonstrating strong customer engagement.
As holiday shopping ramps up, management remains cautiously optimistic. Black Friday and Cyber Monday were strong, but consumers are still budget-conscious and searching for value.
What It Means for Investors
Ulta remains one of the companies that many investors view as a steady compounder, but the valuation debate is becoming more nuanced. The company is gaining market share, expanding internationally, driving strong digital engagement, and launching exclusive brands that competitors can’t replicate.
On the other hand, operating margins have slipped from last year, SG&A costs remain elevated, and valuation models point to meaningful overvaluation. For investors analyzing stocks with a value lens, ULTA may now look expensive. But for those prioritizing long-term growth and brand durability, the momentum story still resonates.
As investors scan investment news for the best company investments, ULTA offers a blend of resilience and innovation — but with a price tag that demands conviction.
Conclusion
Ulta’s Q3 showed that beauty remains one of the most resilient consumer categories, and the company continues to execute across stores, digital, and exclusive brand partnerships. While shares may be priced for strong performance, Ulta’s long-term strategy and category leadership continue to underpin its appeal. For investors, the key question is whether the current premium is justified by future growth.
FAQs
Is ULTA considered overvalued today?
Based on a DCF model estimating fair value at around $358.91 per share, ULTA may be nearly 49% overvalued.
How is Ulta performing compared to last year?
Ulta’s revenue grew 12.9% year over year in Q3, and comparable sales improved by 6.3%.
What is driving Ulta’s customer growth?
Record loyalty membership, strong digital engagement, and exclusive brand launches are expanding Ulta’s customer base.
Are operating margins improving?
Operating margins declined to 10.8% from 12.6% last year due to higher SG&A costs.
Is Ulta’s e-commerce business growing?
Yes. Digital sales grew in the mid-teens, and app transactions now represent the majority of online member sales.
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