Ulta Beauty's (NASDAQ:ULTA) underlying earnings growth outpaced the return generated for shareholders over the past five years

Ulta Beauty, Inc. (NASDAQ:ULTA) shareholders might be concerned after seeing the share price drop 18% in the last month. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 20%, less than the market return of 74%.

In light of the stock dropping 7.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for Ulta Beauty

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Ulta Beauty managed to grow its earnings per share at 24% a year. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Ulta Beauty has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

We're pleased to report that Ulta Beauty shareholders have received a total shareholder return of 10% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research Ulta Beauty in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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