A Stock Nearing its 52-week High that's Headed Higher
Harsh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Whenever I see a stock that’s trading near its 52-week high or 52-week low, the next thing that comes to my mind is whether the one trading near its high can go even higher or the one trading near its low can turn things around. Over the past few days, I have come across a couple of stocks that satisfy my thoughts outlined above.
One on a High and One Clambering Back
Late in August, clothing retailer Urban Outfitters (NASDAQ: URBN) released compelling second quarter results that saw the stock create a new 52-week high. While one might think that waning consumer confidence, cost inflation and economic uncertainty would weigh on Urban Outfitters’ results going forward, I found that the company still has catalysts in the bag and I won’t be surprised if its northward journey continues.
Next, I trained my eyes on VeriFone Systems (NYSE: PAY), an electronic payment solutions company, whose stock was knocked down close to its 52-week low after it posted mixed quarterly results and issued a tepid guidance. But VeriFone is a leading player in its industry, its top line has been growing rapidly and its business around the world is growing impressively. Further, its wide array of services is another strength that shouldn’t be ignored. Keeping these points in mind, VeriFone might turn out to be a great deal at its beaten-down levels.
And this one’s just Ultra Hot
And just last week, I was compelled to add another stock to my list of 52-week highs that can go higher. Beauty retailer Ulta Salon, Cosmetics & Fragrance (NASDAQ: ULTA) jumped more than 6% after the company trumped analyst estimates in its recently reported quarter. The latest beat from Ulta is not really surprising as the company is a consistent performer and has been exceeding expectations for the last year.
The company has delivered strong top line and bottom line growth over the years as seen below and it’s working hard in order to improve its performance in the future.
ULTA Revenue data by YCharts
The company posted a 22% year-over-year jump in revenue in the second quarter and its same-store sales grew an impressive 9.3%. What’s more, Ulta’s gross margin expanded 80 basis points along with a 42% jump in earnings. All of this is a result of Ulta’s well-laid out growth strategy, which focuses on improving store growth, expanding its reach, focusing on its online portal and expanding its product portfolio among others.
A Mix of Catalysts
Ulta had planned to open 100 new stores this year, out of which it has already opened 40 and it plans to open 52 of its remaining target in the ongoing quarter. Moreover, Ulta’s analysis indicates that it can open 1,200 of its 10,000-square foot stores in the country while it currently has 489 stores in comparison. Hence, this means that Ulta has a lot of room to play since it currently caters to only 40% of its addressable market.
Apart from increasing store presence, Ulta places an emphasis on maintaining the freshness of its offerings and adding new products, services and brands. Ulta saw strong growth across its product lines as sales of various beauty products remained strong. Going forward, the company is set to launch a number of fragrances in the ongoing quarter along with mascara and foundation products. It is also expanding its Lancome and Clinique boutiques to an increasing number of stores.
Through a combination of new stores, new products and its loyalty program, Ulta has been growing its business quite well and the same shows up in its guidance for the current quarter. Ulta expects revenue between $494 million and $503 million in the ongoing quarter, signifying a year-over-year jump of around 21% at mid-point.
The Takeaway
Thus, we see that Ulta has an impressive track record of delivering growth behind it and has the potential of getting better in the future. As I said earlier, the company’s methodically planned way of growing its business is appreciable and I won’t be surprised if it creates new 52-week highs going forward.
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TechJunk13 has no positions in the stocks mentioned above. The Motley Fool owns shares of VeriFone Holdings. Motley Fool newsletter services recommend Ulta Salon, Cosmetics & Fragrance. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
