Future returns remain a primary concern for investors. However, looking at past stock returns can also provide wisdom. That's because it can help you see what the company did and didn't deliver, and how the stock price reacted. It is also important to compare the return against an appropriate outcome benchmark.
Turning to a familiar retail name, how much wealth there is Ulta Beauty (NASDAQ: ULTA) created for shareholders over the past five years?
Five years ago, Ulta's stock was trading at around $267 per share and closed at over $415 on January 8. That equates to a 57.6% appreciation. Your $5,000 investment would have grown to $7,878. Ulta Beauty stock doesn't pay dividends, so that doesn't factor in the earnings.
That sounds impressive. But how would you have done if you had invested passive in an index like the S&P 500? The index returned 95.5%, including dividends, during this period. Therefore, your $5,000 investment would have grown to $9,776.
Ulta Beauty's stock has fallen over the past year. It was a fast grower, but sales have been slow recently. People have pulled back on spending, as they have had to pay more for basic items such as food and rent.
Its fiscal third quarter same-store sales (comps) increased just 0.6% in the period ending Nov. 2, 2024. Most of the comps gains came from increased traffic, showing shoppers are being drawn to Ulta stores and website.
Ulta offers products like makeup, skin care, and fragrances at different price points. This should help the company until inflationary 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 around 20 a year ago. That's well below the S&P 500's P/E multiple of 30. With the stock down on cyclical concerns, in five years long-term investors may look back and be satisfied with the returns and wealth that created
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