Key Points
E.l.f.’s business is maturing.
Its stock looks cheap, but it doesn’t deserve a higher valuation.
E.l.f. Beauty's (NYSE: ELF) stock closed at a record high of $221.83 per share on March 4, 2024. That marked a 1,205% gain from its IPO price of $17 per share on Sept. 21, 2016. At the time, the cosmetics company dazzled the market with its rapid sales growth, soaring popularity among Gen Z consumers, and its aggressive expansion plans.
But today, e.l.f.'s stock trades at about $105. Its stock pulled back amid concerns about its slowing revenue growth, higher spending, and its dependence on Chinese suppliers. Let's see if that sell-off was an overreaction -- and if its stock can eventually bounce back.
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Image source: Getty Images.
What happened to e.l.f. Beauty?
E.l.f. carved out a niche in the crowded cosmetics market with cheap products and savvy social media campaigns that targeted younger shoppers. It also acquired other companies -- including Well People in 2020, Naturium in 2023, and Rhode in 2025 -- to expand into the higher-end skincare market and diversify its business beyond its budget products.
From fiscal 2021 to fiscal 2024 (which ended in March 2024), its net sales and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth accelerated as its gross margins reached record highs. But over the following two years, its top- and bottom-line growth decelerated -- even though its gross margins held steady.
Metric |
FY 2021 |
FY 2022 |
FY 2023 |
FY 2024 |
FY 2025 |
FY 2026 |
|---|---|---|---|---|---|---|
Net Sales Growth |
12% |
23% |
48% |
77% |
28% |
25% |
Gross Margin |
65% |
64% |
67% |
71% |
71% |
71% |
Adjusted EBITDA Growth |
(2%) |
22% |
56% |
101% |
26% |
13% |
Data source: e.l.f. Beauty.
Much of e.l.f.'s acceleration from fiscal 2021 to fiscal 2024 was driven by the expansion of its shelf space at major retailers such as Target, Walmart, and Ulta. As it lapped those expansions, its organic growth slowed down, and it increasingly relied on acquisitions to drive its top-line growth. However, its inorganic expansion into higher-end markets increased its exposure to inflationary headwinds, and tariffs on Chinese products drove up its operating expenses, forcing it to adjust its supply chain and raise prices on its budget products. On the bright side, it's reduced its manufacturing dependence on China from nearly 100% in 2019 to about 75% today.
Is e.l.f.'s stock still worth buying?
Analysts expect e.l.f.'s revenue to rise just 20% in fiscal 2027 and 8% in fiscal 2028. They expect its adjusted EBITDA to increase 20% in fiscal 2027 and 6% in fiscal 2028. That deceleration indicates its business is maturing and its high-growth days are over.
With an enterprise value of $6.8 billion, e.l.f. trades at 17 times this year's adjusted EBITDA. It looks historically cheap, but it doesn't really deserve a higher valuation. Therefore, I expect e.l.f.'s stock to stagnate in this choppy market unless its organic growth accelerates again.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target, Ulta Beauty, and Walmart. The Motley Fool recommends e.l.f. Beauty. The Motley Fool has a disclosure policy.