Ulta Beauty's (NASDAQ:ULTA) investors will be pleased with their notable 35% return over the last three years

Ulta Beauty, Inc. (NASDAQ:ULTA) shareholders might be concerned after seeing the share price drop 17% in the last month. But that doesn't change the fact that the returns over the last three years have been pleasing. In the last three years the share price is up, 35%: better than the market.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Ulta Beauty

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Ulta Beauty was able to grow its EPS at 105% per year over three years, sending the share price higher. The average annual share price increase of 10% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth

It is of course excellent to see how Ulta Beauty has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Ulta Beauty stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 25% in the last year, Ulta Beauty shareholders lost 17%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Ulta Beauty better, we need to consider many other factors. For instance, we've identified 1 warning sign for Ulta Beauty that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.