Is It Too Late To Consider e.l.f. Beauty (ELF) After Strong Five Year Share Gains?
- If you are wondering whether e.l.f. Beauty's share price still lines up with its underlying worth, this article will walk through what the current numbers are actually telling you.
- The stock most recently closed at US$81.50, with a 0.7% decline over 7 days, a 9.4% decline over 30 days, a 4.7% gain year to date, an 11.6% gain over 1 year and a very large gain over 5 years.
- Recent news flow around e.l.f. Beauty has focused on its position as a mass market cosmetics brand that aims to compete with larger peers at lower price points and with high distribution reach. This context has kept investors focused on how much future growth is already reflected in the current share price and what a reasonable valuation range might look like.
- Based on Simply Wall St's checklist, e.l.f. Beauty scores 2 out of 6 on its valuation score. Next, we will look at the standard valuation methods behind that result and then finish with a more complete way to think about what the stock might be worth.
e.l.f. Beauty scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: e.l.f. Beauty Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes estimates of the cash e.l.f. Beauty might generate in the future and discounts those back into today’s dollars to arrive at an implied value per share.
For e.l.f. Beauty, the latest twelve month Free Cash Flow is about $226.6 million. Analysts have provided cash flow estimates out to 2028, with Simply Wall St extrapolating further to build a 2 Stage Free Cash Flow to Equity model that runs out to 2035. Within those projections, Free Cash Flow in 2028 is set at $182 million, and later years move through a mix of forecast and extrapolated values, all expressed in US$.
When those projected cash flows are discounted back and combined, the model arrives at an estimated intrinsic value of about $50.39 per share. Compared with the recent share price of $81.50, this DCF output suggests e.l.f. Beauty is 61.8% overvalued on this measure.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests e.l.f. Beauty may be overvalued by 61.8%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: e.l.f. Beauty Price vs Earnings
For a profitable company like e.l.f. Beauty, the P/E ratio is a useful way to check how much investors are paying for each dollar of earnings. It links the share price directly to current profits, which is often the starting point for many investors.
What counts as a “normal” P/E depends on how quickly earnings are expected to grow and how risky those earnings appear. Higher expected growth and perceived resilience can justify a higher P/E, while slower growth or higher risk usually point to a lower multiple.
e.l.f. Beauty is currently trading on a P/E of 46.31x. That sits above both the Personal Products industry average of 22.79x and the broader peer group average of 12.79x. Simply Wall St’s Fair Ratio for the stock is 50.58x, which is its proprietary estimate of what the P/E might be given factors like earnings growth, profit margins, industry, market cap and risk profile.
This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for company specific characteristics rather than assuming one size fits all. With the current P/E of 46.31x compared with a Fair Ratio of 50.58x, the model suggests the shares are somewhat below that tailored level.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your e.l.f. Beauty Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simply your story about a company tied directly to your own forecast and fair value estimate.
On Simply Wall St’s Community page, a Narrative lets you set your view on e.l.f. Beauty’s future revenue, earnings and margins. It then links that story to a financial model and a Fair Value that you can compare with the current share price to help decide whether you see the stock as attractively priced or not.
These Narratives update automatically as new news, guidance or earnings are added, so your fair value view stays aligned with the latest information rather than a one off spreadsheet that quickly goes out of date.
For example, one e.l.f. Beauty Narrative currently uses a Fair Value of about US$100, while another uses about US$251. This shows how two investors looking at the same company and data can reach very different conclusions based on their assumptions, and you can place your own Narrative on that spectrum.
Do you think there's more to the story for e.l.f. Beauty? Head over to our Community to see what others are saying!
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.
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