At a time when many traders are struggling with the hangover from growth due to the pandemic, Ultimate beauty (ULTA -0.28%) moves in the opposite direction. The beauty product specialist recently boosted its 2022 revenue outlook to nearly $10 billion, in fact. And as profit margins plummet at retailers like walmartin Ulta, they go up.

A closer look at trading trends reveals a few more reasons to love this stock today. Let’s take a look at some of the most compelling.

Prepare for success

The first half of 2022 has been a great time for the company. Sales were up 16% at existing locations, and that’s on top of a 61% spike in the prior year period. These gains were balanced between an increase in customer traffic (up 9%) and an increase in average spend (up 6%).

These wins set Ulta Beauty apart from nearly all national retail chains, which as a group are facing slowing demand due to abrupt shifts in consumer consumption preferences.

The beauty niche appears to be benefiting from these changes, which disproportionately benefit the category leader. “Strong consumer demand and broad-based momentum for our business continued,” CEO Dave Kimbell said in the company’s second-quarter earnings release in late August.

Enjoy generously

The chain is also making skyrocketing profits even as costs rise. While companies like Walmart, Target and Lowe’s report stable or declining margins, this is not the case for Ulta Beauty. Its operating profit reached $391 million in the last six months, or 17% of sales, compared to $332 million, or 16.9% of sales in the year-ago period.

This success reflects the company’s strong market position in an expanding niche. But it’s also a function of its deep connection with shoppers, who love Ulta’s in-store browsing experience and convenient online platform. This connection is most evident in metrics such as customer traffic, which grew 8% last quarter even as the chain continued to raise prices.

Best prices

These sales and profit gains could be a temporary consequence of short-term shifts in consumer demand. Walmart and Target are currently experiencing painful setbacks in previously popular retail niches like home furnishings, after all, and Ulta Beauty could suffer a similar slump in the coming quarters.

However, investors are unlikely to see it suffer large inventory write-downs or face a price crash, in part because Ulta’s inventory is not as seasonal and its products are not not bulky like outdoor furniture. And even if its profit margins shrink, its profits could continue to increase.

The best news for investors is that Ulta Beauty’s stock valuation is still attractive. The retail stock is trading at around 2.4 times sales, much cheaper than the three times sales valuation it boasted as recently as mid-2021.

There are risks here, including the possibility that an economic crisis will put pressure on sales, or that there will be a decline in demand for beauty products after several years of surging sales volumes. But the bigger picture still looks bright for the company and for long-term returns for investors.

Ulta is gaining market share online and in its stores, and demonstrating the value of its sales platform. If it can maintain its momentum, its sales could increase significantly over time, even after the company crosses the $10 billion mark in annualized revenue, which is expected to happen by the end of 2022.

Demitri Kalogeropoulos has no position in the stocks mentioned. The Motley Fool holds positions and recommends Ulta Beauty and Walmart Inc. The Motley Fool recommends Lowe’s. The Motley Fool has a disclosure policy.