Future returns remain the primary concern of investors. However, looking at past stock returns can also provide wisdom. That’s because it can help you see what the company has and hasn’t achieved, and how the stock price responded. It is also important to compare the return with an appropriate return benchmark.
As for a famous store name, how much wealth has Ultimate beauty (NASDAQ: ULTA) created for shareholders in the past five years?
Five years ago, Ulta’s stock traded at about $267 per share and closed at more than $415 on Jan. 8. This amounts to an increase of 57.6%. Your $5,000 investment would have grown to $7,878. Ulta Beauty shares do not pay dividends, so that does not count towards the return.
That sounds impressive. But how would you have done if you had invested? passive in an index like the S&P500? The index returned 95.5% during this period, including dividends. So your $5,000 investment would have grown to $9,776.
Shares of Ulta Beauty have fallen over the past year. It was a fast grower, but sales have been slow lately. People have cut back on spending as they have had to pay more for basics like food and rent.
Comparable store sales (comps) in the fiscal third quarter rose just 0.6% in the period ended Nov. 2, 2024. Most of the Comps gain came from increased traffic, which shows customers heading to Ulta’s stores and website are drawn.
Ulta offers products such as cosmetics, skin care and fragrances in different price ranges. This should help the company until inflationary pressures subside and consumers looking for cheaper items feel more comfortable spending.
The stock trades at a price-to-earnings (P/E) ratio of 17, compared to around 20 a year ago. That’s much lower than the S&P 500’s price-to-earnings ratio of 30. Now that the stock has fallen on cyclical concerns, long-term investors can look back in five years and be satisfied with the returns and wealth created.
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