On June 5, the company reported first-quarter 2012 profit of 54 cents, surpassing the Zacks Consensus Estimate by 1.89%. Moreover, quarterly earnings shot up 45.9% from last year’s 37 cents and were ahead of management’s guided range of 46 cents - 48 cents per share.

Net sales rose 22.8% year over year to $474.1 million and were well above management’s projected range of $452 million-$460 million. The revenue upside was driven by double-digit growth in comps and unit expansion. Operating income surged 47.1% year over year to $57.4 million.

Guidance Further Adds Strength

For 2012, the company expects to achieve comparable store sales growth 200 to 300 basis points above the high end of its long term goal of 3% to 5%. Net income growth is also expected to be more than its long term target of 25% - 30%.

Earnings Estimates Climbing Higher

In response to the solid quarter, eight of nine estimates for fiscal 2012 have moved up in the last 7 days, pushing the Zacks Consensus Estimate up by 2% to $2.55. The current estimate represents an upside of almost 34% over 2011.

The Zacks Consensus Estimate for 2013 increased 2% to $3.21 as 7 of 8 estimates moved up in the past week. This implies a year-over-year growth of more than 25%.

Valuation Looks Expensive

Though the stock of Ulta Salon is expensive with respect to most valuation metrics, it looks attractive from a return on equity (ROE) perspective. It has a trailing 12-month ROE of 23.6%, which is substantially above its peer group average of 14.0%. This implies that the company reinvests its earnings more efficiently than its peer group. The company's long-term EPS growth projection of 24.2% is also higher than the peer group average of 12.5%. Continued...