DCF Studio

    ULTA · NMS · Consumer Cyclical

    Ulta Beauty, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 455.97

    Market price

    USD 540.98

    Implied upside

    -15.7%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 3.4% of revenue against depreciation of 2.3%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 455.97-15.7%
    Exit multiple
    USD 625.96+15.7%
    Market price
    USD 540.98

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 13.2bnUSD 14.1bnUSD 15.0bnUSD 16.0bnUSD 17.1bn+6.7%
    EBITUSD 1.9bnUSD 2.0bnUSD 2.2bnUSD 2.3bnUSD 2.5bn+6.7%
    NOPATUSD 1.5bnUSD 1.6bnUSD 1.7bnUSD 1.8bnUSD 2.0bn+6.7%
    Add depreciation & amortisationUSD 308.4mUSD 329.0mUSD 351.0mUSD 374.4mUSD 399.4m+6.7%
    Less capital expenditureUSD -454.9mUSD -485.3mUSD -517.7mUSD -552.3mUSD -589.2m+6.7%
    Less increase in working capitalUSD -399.0mUSD -425.6mUSD -454.0mUSD -484.3mUSD -516.7m+6.7%
    Free cashflow to firmUSD 960.4mUSD 1.0bnUSD 1.1bnUSD 1.2bnUSD 1.2bn+6.7%
    Discount factor0.95530.87180.79560.72610.6626-
    Present valueUSD 917.5mUSD 893.2mUSD 869.6mUSD 846.5mUSD 824.1m-2.6%
    Present Value Of The ForecastUSD 4.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.902Reported 0.854, pulled toward 1.0 (Blume)
    Cost of equity9.96%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 23.1bn91.4% of capital
    Total debtUSD 2.2bn8.6% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.58%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 455.97

    80% of EV

    Forecast FCFF, final year
    USD 1.2bn
    Capex at depreciation, working capital in reinvestment
    USD 2.0bn
    Less reinvestment at g/ROIC (4.6% of NOPAT)
    USD -89.8m
    Capitalised
    USD 1.9bn
    ROIC (reported)
    54.3%
    Terminal value, undiscounted
    USD 26.9bn
    Terminal value, discounted
    USD 17.9bn
    Enterprise value
    USD 22.2bn
    Less net debt
    USD 1.7bn
    Equity value
    USD 20.5bn

    Exit at 13.4x EBITDA

    Value per shareUSD 625.96

    85% of EV

    Terminal value, undiscounted
    USD 38.5bn
    Terminal value, discounted
    USD 25.5bn
    Enterprise value
    USD 29.9bn
    Less net debt
    USD 1.7bn
    Equity value
    USD 28.2bn

    Spread between methods: 31%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.58%570.37613.25664.52726.93804.57
    8.58%478.75508.41542.91583.54632.11
    9.58%410.10431.54455.96484.06516.74
    10.58%356.82372.84390.80411.11434.24
    11.58%314.32326.60340.21355.38372.39

    Outlined: this model. Green text: above today's price of 540.98. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year6.7%11.7%+5.0pp
    EBIT margin14.4%16.7%+2.2pp
    Discount rate9.6%8.6%-1.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.