Ulta Beauty, Inc.ULTANASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $1,086.70 per share(market-calibrated)

+60.5%

Upside to Fair Value

Current

$677.00

Pure Model

$1,141.13

Fair Value

$1,086.70

Bull Case

$1,429.74

Bear Case

$897.20

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,141.13.

What's Driving This Ratingfor ULTA

✓

CapEx already efficient

CapEx at 2.56% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 23.10% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 9.00% revenue growth, fading to 3.00% by Year 10. Revenue reaches $18.2B (vs $11.3B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 67.44% indicates efficient cash generation. FCF reaches $3.1B by Year 10 (17.15% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.83

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.24%

Cost of Debt

Pre-tax Cost of Debt0.08%

Tax Rate23.98%

After-tax Cost of Debt0.06%

Equity Weight (E/V)94.32%

Debt Weight (D/V)5.68%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (94.32% × 8.24%) + (5.68% × 0.06%)

= 7.78%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$12.3B	$13.9B	$15.3B	$16.5B	$18.2B
EBIT	$2.8B	$3.2B	$3.5B	$3.8B	$4.2B
Tax	$682M	$767M	$848M	$914M	$1.0B
NOPAT	$2.2B	$2.4B	$2.7B	$2.9B	$3.2B
+ Depreciation	$287M	$323M	$357M	$385M	$424M
- Capex	$315M	$355M	$392M	$422M	$465M
- Δ NWC	$63M	$45M	$38M	$37M	$33M
Free Cash Flow	$2.1B	$2.4B	$2.6B	$2.8B	$3.1B
Discount Factor	0.928	0.799	0.688	0.592	0.473
Present Value	$1.9B	$1.9B	$1.8B	$1.7B	$1.5B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.1B

Terminal Growth Rate3.00%

WACC7.78%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$67.1B

PV of Terminal Value$31.7B

Exit Multiple Method

Year 10 EBITDA$4.6B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$92.4B

PV of Terminal Value$43.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.4B

PV of Terminal Value$31.7B

Enterprise Value$49.1B

(-) Net Debt$1.2B

Equity Value$47.9B

Shares Outstanding47M

Price per Share$1,014.74

Exit Multiple Method

PV of Projected FCFs$17.4B

PV of Terminal Value$43.7B

Enterprise Value$61.1B

(-) Net Debt$1.2B

Equity Value$59.8B

Shares Outstanding47M

Price per Share$1,267.52

Pure Model Fair Value

$1,141.13

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
5.78%	$1,446.57	$1,526.84	$1,635.98	$1,793.01	$1,880.79
6.78%	$1,234.19	$1,278.88	$1,335.39	$1,409.14	$1,509.42
7.78%	$1,080.27	$1,107.82	$1,141.13	$1,182.22	$1,234.19
8.78%	$960.85	$979.02	$1,000.33	$1,025.68	$1,056.34
9.78%	$864.04	$876.62	$891.05	$907.78	$927.41

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$897.20

32.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.04

Base Case

$1,141.13

68.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.83

Bull Case

$1,429.74

111.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.71

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.00%

Year 3 Revenue Growth5.56%

Year 5 Revenue Growth4.20%

Year 7 Revenue Growth3.72%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin23.10%

Tax Rate23.98%

Historical Capex / Rev2.56%

NWC / Revenue6.21%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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