Update on ULTA Beauty!

all right what's up analyst so I want to take this opportunity to make a really great educational video on what it means to actually hold a stock and then keep track of it uh once you have it um I don't believe in buying and just holding forever uh because the whole point is that I'm trying to find businesses that have intrinsic values up here and prices down here and if this price gets a little bit too up or if the intrinsic value starts to go down a little bit too far I want to know about it so it's a good thing to check out all of the quarterly statements that the company issues some people don't follow that rule some security analysts don't they just look at annual statements but you know I have a little more time on my hands I say why not uh take a look at this um so Ulta beauty this is a stock that I have Holdings in and once again I'm not making Financial advice for anyone to purchase the stock um but I want to calculate a few of the measures that I've used in the past to valuate stock so the first one is earnings earnings is a pretty basic one so if you start with net income um and now we have a new number for August at 566 million um we're going to first find the discrepancy see between last year's 26 weeks ended and this year's 26 weeks ended and you'll see what that entails shortly so 647 - 566 gives us an 81 million discrepancy so I'm just going to put that right here then with that number we can now kind of figure out the estimated annual income for the year 2025 ended and be we can do that because now that we have this discrepancy between 2024's numbers and um and 2023 is in this case we can now extrapolate based off that $81 million discrepancy what next year is going to be and we can do that in this case by subtracting 81 million from last year's annual statement to get this year's annual annual net income so we go to there we go to so February 3rd 2024 year ended and we find net income um it's at 1 1291 so our answer in millions for 2025 net income is going to be this 1210 1210 and so now we can use that to figure out an earnings per share the way we can do that is divide by the number of shares outstanding um um you can find that in the income statement so it's saying 48 oh wait this is the annual statement we're going to look at their most recent number so as of August 3rd it is saying they have 47,300 shares outstanding okay that's in millions so it's 47.3 million so divided by 47 3 million and we have a PE ratio of 26 so oh wait sorry my mistake that is not the PE Ratio I kind of my heart dropped as well when I looked at that this is the earnings per share earnings per share of 25.6 I would never buy the stock if that was the PE Ratio now we're going to look at their price to find the PE ratio so 351.5 is our number we divide by the earnings per share it is kind of futile to put in these decimal points cuz you the whole point to Value investing is that you're not finding the exact intrinsic value because you can't it's impossible there's so many qualitative and quantitative factors but you can have a range um and so it is that makes it a little bit stupid to put in the decimals I could even round this down to like 300 or 400 and it would be the same idea but just going to be exact for the sake of the video this is going to be the PE Ratio 13.7 still undervalued few 13.7 just to give you an idea of what that means as a p ratio it is slightly higher than a neutral as neutral outlook for the B business which is at 12 neutral means nothing good nor bad is going to happen they're kind of just going to stay stable um and that is not the case in Ulta's in Ulta stock uh we look at their past performance of Revenue and we see that this stock does not deserve a neutral Outlook um they've had quarterly increases uh every single quarter except for 2020 um I shouldn't say every quarter but they've had consistent quarterly increases as well as net income come on quarterly net income increases and you can see that here they've had very very impressive growth so this is NE definitely not justified by the stock if we just look at earnings um this number should be much higher in other words people should be paying a higher price tag on this stock um that is also going to be supported by further analysis into their quarterly statement so we looked at their earnings now let's check out their return on invested Capital um that's a number I'd love to use because it shows the earn percentage on the capital that they use for business normal business operations the way you calculate that is you add receivables so 2011 in millions plus merchandise inventories at 9 1998 in millions and then skip prepaid expenses and other current assets NE because those are negligible values and then we're going to include these four rows um for their operating assets so property equipment is going to be+ 1226 in millions then plus 1600 and then finally 11 and and then sorry three 57 but that is a very small number I would not include that so we have a total of 5036 for now and now the final way to find invested capital is to subtract the non-interest bearing current liability so that's accounts payable because they don't pay interest on accounts payable acred liability say they don't do that uh deferred revenue they don't pay interest on that like I said this is going to be a rough very rough estimate and current operating lease liabilities they do pay interest on that hence the name lease um that will tell you if they pay interest so we have a total invested capital of 3726 in millions and we already calculated their earnings for 2025 which is is $ 12291 we get this divided by this Ando return on invested capital of 35% fantastic news um that is very impressive just as a perspective um the last video I made on Dollar General had a return on invested capital of about 5.6% so this means with every dollar that the company invests into the business uh or operations with every dollar they make 35 cents of earnings and that is quite impressive I can see why Berkshire hathway now holds millions of dollars in the stock um and just to go a little bit further if we scroll down scroll down I'm going to take a look at their repurchase program are they keeping up with returning value to the shareholder and the answer is drum roll please there we go shares rep purchased from last year it was 1135 this year actually increased small amount 1138 shares repurchased that's in thousands um so 1.1 million shares were purchased and the total cost was 500 million and just as a um sort of perspective if you take 500 million and you see how much that relates to the market cap so it's going to be 0.5 over 16.8 in billions they repurchase 2.9% of their about 3% of their market cap you could say that's equivalent to paying a 3% dividend um this company doesn't pay a dividend so that is definitely sub stantial and now that you can see that this stock is definitely worth a 13.7 PE ratio um now that I see that and I'm very happy to note its return on invested Capital it's share repurchase plan um I would most likely continue to hold the stock and in fact I would look for points where I can buy it at a discount um when you're a value investor when a stock goes down and its business and intrinsic value has not changed and even gone up you buy more um this uh today I'll give you an example of a decrease of 4.3 point 4.3% is good news for me because now I can buy more shares on sale um because the intrinsic value is here and now the price just went a little bit farther down so I have all this space all this margin of safety to make money to have appreciation in my position and I'll wrap it up with that I think uh you know for your Investments I think keeping up with them is very very important uh I will do a little bit more um information on on how exactly you do that uh down in the details uh with all of the principles that have you know been taught by the authors of security analysis and so forth and so I'll make a video on that on detailing the process uh and really you know educating and showing how that gets done um just as a final note let's just make sure their operating margin has not gone down to zero and it's actually remained around the same 14.5% and you know this company has basically gone down uh because people are afraid of macroeconomic events um you know it misses Wall Street expectations you don't need to pay attention to Wall Street but the macroeconomic events are not things that are existential threats to a business when you're looking at a business you see the business in a self-contained fashion if you start thinking about interest rates and inflation and wars and epidemics you could make literally make an infinitely long list of reasons that you would never buy any stock but the problem is is that is unreasonable because first you never know what's going to happen uh no one really knew that the co pandemic was going to happen um you know years in advance or you know no one's no one truly knows where inflation or interest rates are going to go or employment and so you de you de deal with what you can know you deal with your circle of competence as Warren Buffett puts it and within that Circle of competence is finan are financials are qualitative aspects of the company and those are the things you pay attention to uh when you are valuating a stock and it's actually a little bit more calming um because you don't have to constantly be on your toes about you know where the economy is going and trying to consider all the you know thousands of variables that go into the fluctuations of an economy like our own so I hope you enjoyed that video I'm going to definitely hold Ulta beauty stock and wait uh patiently for an opportunity to buy even more shares um I may buy more at 320 that looks like a good uh starting point so we'll see um I'll keep you guys updated peace