Future returns remain investors’ primary concern. However, looking at past stock returns can also impart wisdom. This is because it can help you see what the company did and didn’t achieve, and how the share price reacted. It is also important to compare performance with an appropriate benchmark.
Going back to a familiar retail name, how much wealth has Ulta Beauty (NASDAQ:ULTA) created for shareholders during the last five years?
Five years ago, Ulta stock was trading at around $267 per share and closed at more than $415 on January 8. That is equivalent to an appreciation of 57.6%. Your $5,000 investment would have grown to $7,878. Ulta Beauty stock doesn’t pay dividends, so that doesn’t impact performance.
That sounds impressive. But how would you have fared if you had passively invested in an index like the S&P 500? The index returned 95.5%, including dividends, during this time. Therefore, your $5,000 investment would have increased to $9,776.
Ulta Beauty shares have plummeted over the past year. It had rapid growth, but sales have been slow lately. People have cut back on spending as they have had to pay more for basic items like food and rent.
Fiscal third-quarter same-store sales (comps) increased just 0.6% for the period ending Nov. 2, 2024. Most of the comps increase came from increased traffic, showing that Shoppers are drawn to Ulta’s stores and website.
Ulta offers products such as cosmetics, skin care, and fragrances at various price points. This should help the company until inflation pressures ease and consumers looking for lower-priced items feel more comfortable spending money.
The stock trades at a price-to-earnings (P/E) ratio of 17, compared to about 20 a year ago. That’s much lower than the S&P 500’s P/E multiple of 30. With the stock down on cyclical concerns, in five years long-term investors can look back and be satisfied with the returns and wealth created .
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