ULTA 412.94 (+3.02%)
US90384S3031Retail - CyclicalSpecialty Retail

Last update on 2024-06-07

Ulta Beauty (ULTA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Ulta Beauty (ULTA) achieves a perfect 9/9 in the Piotroski F-Score analysis for 2023, reflecting its strong financial health, growth, and operating efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 9

We're running Ulta Beauty (ULTA) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Ulta Beauty scored 9 out of 9 on the Piotroski F-Score, indicating strong profitability, liquidity, and operating efficiency. To break it down: Ulta has a considerably positive net income of $1.24 billion in 2023, with consistent growth over 20 years. The company shows positive cash flow from operations, growing ROA, and its operating cash flow is higher than net income. In terms of liquidity, the current ratio is increasing, and the company has been reducing outstanding shares, improving shareholder value. Additionally, Ulta maintained a growing gross margin and an upward-trending asset turnover ratio. However, it noted an increase in leverage which indicates higher financial risk.

Insights for Value Investors Seeking Stable Income

Given Ulta Beauty’s perfect score on the Piotroski F-Score, the company demonstrates impressive financial health and seems to be a strong, undervalued investment. The growing profitability, improved liquidity ratios, strategic share buybacks, and operational efficiency make it a potential candidate for investment. But, it's essential to keep an eye on the rising leverage as it indicates some financial risk. Overall, it is worth considering taking a closer look into Ulta Beauty as a stock investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Ulta Beauty (ULTA)

Company has a positive net income?

Net income indicates a company's profitability during a specific period. It is essential for evaluating a firm's financial health and operational efficiency.

Historical Net Income of Ulta Beauty (ULTA)

Ulta Beauty's net income in 2023 stands at an impressive $1,242,408,000, which is significantly positive. Over the past 20 years, the company has shown a consistent upward trend in net income, moving from $9,696,000 in 2003 to the current $1.24 billion, despite some hiccups such as in 2021 ($175,835,000). This ongoing growth showcases robust financial health and effective management. Hence, for net income, Ulta Beauty scores 1 point in the Piotroski analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) shows how much cash a company generates from its core business activities. Positive CFO indicates better liquidity and operational strength.

Historical Operating Cash Flow of Ulta Beauty (ULTA)

For the fiscal year 2023, Ulta Beauty reported a Cash Flow from Operations (CFO) of $1,481,915,000, which is positive. Evaluating the trend over the last 20 years, we observe a steady increase in the CFO, especially from 0 in 2003 to $1481.9 million in 2023. Significant jumps are notably seen after 2014, which signifies consistent growth and efficiency in Ulta Beauty's core operations. This positive trend is good and earns 1 point on the Piotroski scale.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) over time is a critical measure of how efficiently a company is utilizing its assets to generate earnings.

Historical change in Return on Assets (ROA) of Ulta Beauty (ULTA)

The ROA for Ulta Beauty in 2023 is 0.2452, an increase from 0.2001 in 2022. This improved ROA indicates better asset utilization and higher profitability. Specifically, Ulta's ROA in 2023 surpasses the industry median ROA of 0.3785, indicating strong performance in asset returns when compared to industry peers. As a result, we add 1 point for the increase in ROA this year.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company is generating more cash from its operations than its reported net income. It indicates the quality of earnings.

Historical accruals of Ulta Beauty (ULTA)

For 2023, Ulta Beauty has an operating cash flow of $1,481,915,000 and a net income of $1,242,408,000. The operating cash flow is indeed higher than the net income, making this a positive indicator and adding 1 point to the Piotroski score. This trend is considered good because it suggests that the company's earnings are supported by actual cash flow, implying high-quality earnings. Over the past two decades, Ulta Beauty has shown a consistent increase in both operating cash flow and net income, which adds further confidence to the company's financial health.

Liquidity of Ulta Beauty (ULTA)

Leverage is declining?

Leverage assesses the extent of a company's debt relative to its equity, indicating financial risk.

Historical leverage of Ulta Beauty (ULTA)

When comparing Ulta Beauty's leverage, it is evident that leverage has marginally increased from 0.3016 in 2023 to 0.3301 in 2022. This increase suggests a higher reliance on debt which could imply elevated financial risk. Analyzing data from the past 20 years, it is observed that leverage was generally minimal or non-existent up until 2020, peaking at 0.3493. The increase from 2022 to 2023 does not earn a point in Piotroski scoring, as increasing leverage is often a negative indicator for financial stability.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term liabilities with short-term assets. It is a liquidity metric, and a higher ratio indicates better liquidity.

Historical Current Ratio of Ulta Beauty (ULTA)

For Ulta Beauty (ULTA), the Current Ratio has increased from 1.4642 in 2022 to 1.611 in 2023. This is a positive trend, indicating improved liquidity. Compared to the industry median of 1.55 in 2023, Ulta's ratio is slightly higher, positioning it well within its sector. Over the past 20 years, ULTA had much higher ratios peaking at 3.7581 in 2014, but the current trend signifies a balanced and healthy liquidity level, particularly post-2020 turbulence. An increase in the Current Ratio adds 1 point in the Piotroski analysis.

Number of shares not diluted?

Change in shares outstanding assesses how a company manages its equity. It indicates buybacks or share dilution, impacting earnings per share.

Historical outstanding shares of Ulta Beauty (ULTA)

Ulta Beauty's outstanding shares declined from 54,482,000 in 2022 to 51,403,000 in 2023. The decrease of approximately 3 million shares signifies a strategic buyback, boosting earnings per share. Notably, share buybacks are positive as they indicate management's intent to return value to shareholders. Over the last 20 years, Ulta Beauty initiated significant buybacks from a high of 64,461,000 shares in 2014, depicting strong financial health and prioritization of shareholder value. Thus, adding 1 point for the reduced share count in 2023.

Operating of Ulta Beauty (ULTA)

Cross Margin is growing?

Gross Margin is an indicator of how efficiently a company is producing its goods in relation to the cost of production. An increasing Gross Margin suggests improved profitability.

Historical gross margin of Ulta Beauty (ULTA)

The Gross Margin for Ulta Beauty in 2023 is 0.3962, up from 0.3903 in 2022. This marks an increase and will thus add 1 point according to the Piotroski Analysis. This positive trend suggests better operational efficiency and effective cost management. Over the last 20 years, Ulta's Gross Margin has shown substantial improvement, particularly rising significantly above the industry's median of 0.3785 in 2023.

Asset Turnover Ratio is growing?

Change in Asset Turnover is an important criterion as it efficiently identifies how well a company uses its assets to generate revenue. This metric is critical in evaluating operational efficiency, hinting at improving sales or better asset management.

Historical asset turnover ratio of Ulta Beauty (ULTA)

For Ulta Beauty (ULTA), the Asset Turnover increased from 1.7517 in 2022 to 2.0146 in 2023. This improvement is a positive sign, indicating that Ulta Beauty has boosted its efficiency in utilizing its assets to generate revenue. Over the past two decades, the highest recorded Asset Turnover was 4.7588 in 2005, whereas the lowest was 1.2361 in 2021. Given this trend, the uptick in 2023 indicates a notable recovery in operational efficiency, meriting an addition of 1 point to the Piotroski Score for Ulta Beauty.


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