Will This Upgrade Help Ulta Salon (ULTA) Today?

Story updated at 10 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Goldman Sachs upgraded Ulta Salon (ULTA) to "buy" from "neutral" Thursday.

Shares of Ulta gained 4.4% to $105.70 in morning trading.

The firm raised a price target for the company to $118 from $107. Ulta remains a compelling growth opportunity according to Goldman Sachs. The firm believes Ulta can exceed its consensus growth expectations.

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TheStreet Ratings team rates ULTA SALON COSMETCS & FRAG as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ULTA SALON COSMETCS & FRAG (ULTA) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 14.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ULTA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, ULTA has a quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
  • ULTA SALON COSMETCS & FRAG has improved earnings per share by 9.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ULTA SALON COSMETCS & FRAG increased its bottom line by earning $3.14 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.78 versus $3.14).
  • Net operating cash flow has increased to $227.59 million or 40.88% when compared to the same quarter last year. In addition, ULTA SALON COSMETCS & FRAG has also vastly surpassed the industry average cash flow growth rate of -19.02%.
  • The net income growth from the same quarter one year ago has exceeded that of the Specialty Retail industry average, but is less than that of the S&P 500. The net income increased by 9.5% when compared to the same quarter one year prior, going from $64.53 million to $70.68 million.
  • You can view the full analysis from the report here: ULTA Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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