The Intrinsic Value Podcast - The Investor’s Podcast Network
TIVP003: Ulta Beauty (ULTA): A Beautiful Compounder w/ Shawn O’Malley
Jan 19, 2025
Dive into the world of Ulta Beauty, a rising star in the cosmetics industry. Discover how it transformed into an e-commerce powerhouse and built an impressive loyalty program with 44 million members. Explore the in-store experiences that keep customers coming back and how Ulta’s returns on capital stack up against competitors like Sephora. Uncover the secrets behind Ulta's financial resilience and see whether it's a smart addition to any investment portfolio!
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Quick takeaways
- Ulta Beauty's impressive financial performance includes average returns on equity exceeding 50% and consistent revenue growth over 14% annually.
- Mary Dillon's leadership transformed Ulta into an e-commerce giant, significantly increasing online sales and enhancing customer engagement through a robust loyalty program.
Deep dives
Investment Thesis on Ulta Beauty
Ulta Beauty is highlighted as a strong candidate for long-term investment due to its impressive financial performance. The company has achieved average returns on equity exceeding 50% over the past five years and has enjoyed consistent revenue growth of over 14% annually for the last decade. Its robust business model features high gross margins at 42%, complemented by a reasonable price-to-earnings ratio and over 5% free cash flow yield. This financial foundation creates an attractive investment proposition for those seeking intrinsic value compounders.
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