At close to $260.50, shares of Ulta Salon, Cosmetics & Fragrance (ULTA) - Get Report -- aka Ulta Beauty -- are up close to 41% for the year to date. ULTA has been a real nail-biter of a battle on the direction of the stock between the bulls and the bears.

Investors await the beauty company's earnings Thursday for a sense of which way it's going.

The shorts say the company has too much inventory. Second-quarter inventory was up 32% outstripping sales growth of 22%. Accounts payable increased 32% as well, which could indicate the company is relying on credit provided by its suppliers and it has slowed down paying for merchandise.

The bears say third-quarter guidance was disappointing. If taken at the mid point of guidance, the company sees revenue of $1.072 billion and earnings per share of $1.27. Analyst estimates were over $1.30.

Shorts complain the stores' base has reached saturation, new stores are cannibalizing existing stores and same-store sales figures are overstated.

The bulls say poppycock. Ulta is one of the fastest-growing retailers in America. Quarterly reports are simply snapshots of the company's activity and Ulta is building so many stores so fast, it's inevitable the company would be caught with lots of inventory as it is fitting out finished stores. In the second quarter alone, the company opened 24 new stores (it opened 20 in 2015) and relocated one and renovated two others.

Analysts think the company will report third-quarter sales of $1.109 billion and earnings of $1.37.

After the October analyst meeting, it seems most investors become increasingly confident in ULTA's ability to deliver mid-teens revenue and 20% earnings growth.

For its part, management raised its third-quarter guidance. The company is forecasting earnings of $1.35 to $1.38 (up from $1.25 to $1.30) and same-store sales to increase 14% to 15% compared to the previous guidance of 12% to 14%. (The company's same-store sales include e-commerce sales.) Management also believes it can deliver 200 basis points of operating margin expansion from the 2016 levels to reach its mid-teens target by 2019.

The company ended the second quarter with 907 stores. Management believes it can open as many as 1,200. Some analysts believe that target is low and the company could squeeze in as many as 1,700 stores over the longer term.

I have been bullish on Ulta for a long time, but after the second-quarter report I definitely turned cautious.

I am optimistic the stock can move higher, but the short sellers bring up some good points. If inventory and payables are out of whack this quarter, the stock will move lower. I'm sitting on the sidelines until the company reports on Thursday.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.