One 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.

The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For instance the Ulta Beauty, Inc. share price is 191% higher than it was three years ago. Most would be happy with that. It’s also good to see the share price up 13% over the last quarter. But this could be related to the strong market, which is up 6.2% in the last three months.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

During three years of share price growth, Ulta Beauty achieved compound earnings per share growth of 27% per year. This EPS growth is lower than the 43% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did three years ago. That’s not necessarily surprising considering the three-year track record of earnings growth.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

Ulta is expected to post earnings of $6.75 per share for the current quarter, representing a year-over-year change of +7.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.4%.