Future returns remain investors’ primary concern. However, looking at past stock returns can also impart wisdom. That’s because it can help you see what the company did and did not accomplish, and how the stock price reacted. It’s also important to compare the return against an appropriate benchmark.
Turning to a familiar retail name, how much wealth has Ulta Beauty (NASDAQ: ULTA) created for shareholders over the last five years?
Five years ago, Ulta’s stock traded at about $267 a share and closed at over $415 on Jan. 8. That works out to a 57.6% appreciation. Your $5,000 investment would’ve grown to $7,878.Ulta Beauty’s stock doesn’t pay dividends, so that doesn’t factor into the return.
That sounds impressive. But how would you have done had you invested passively in an index like the S&P 500? The index returned 95.5%, including dividends, during this time. Hence, your $5,000 investment would have grown to $9,776.
Ulta Beauty’s stock has slumped over the last year. It was a fast grower, but sales have been sluggish lately. People have pulled back spending, since they’ve had to pay more for basic items like food and rent.
Its fiscal third-quarter same-store sales (comps) increased just 0.6% in the period ended on Nov. 2, 2024. Most of the comps gain came from increased traffic, showing shoppers are drawn to Ulta’s stores and website.
Ulta offers products like cosmetics, skincare, and fragrances at various price points. This should help the company until inflationary pressures ease and consumers seeking lower-priced items feel more comfortable spending money.
The stock trades at a price-to-earnings (P/E) ratio of 17, compared to about 20 a year ago. That’s much lower than the S&P 500’s P/E multiple of 30. With the stock down due to cyclical concerns, in five years long-term investors may look back and be pleased with the returns and wealth created.
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