e.l.f. Beauty has delivered a very strong multi year share price run, and the question now is whether the current valuation is properly supported by the cash flows that the business can generate. With fresh expansion news in Europe on the table, the gap between story and cash flow math is what matters for anyone looking at the stock today.
- The share price is up 253.2% over 5 years, which puts a lot of weight on whether the underlying cash flows can live up to what the market is pricing in.
- rhode's rollout into more than 500 Sephora locations across 19 European markets can reshape expectations for how quickly e.l.f. Beauty converts brand reach into future cash generation and reinvestment needs.
- What if you looked at e.l.f. Beauty through its earnings instead? See why e.l.f. Beauty's 103.6x P/E tells a different valuation story.
The stock's next move may depend on whether the current share price makes sense when measured against the cash flows implied by the intrinsic value estimate.
To see how e.l.f. Beauty compares with other opportunities that focus on valuation, use a focused stock screen as your next step and review the 31 high quality undervalued stocks.
Where Does e.l.f. Beauty Sit on Cash Flow?
The Discounted Cash Flow (DCF) model here uses a 2 Stage Free Cash Flow to Equity approach to link e.l.f. Beauty’s future cash generation to today’s $104.68 share price. Latest twelve month free cash flow sits at about $276 million in reporting currency, with the projections assuming that cash flows continue growing rather than shrinking over the coming decade.
Those estimates point to free cash flow stepping up into the mid $200 million range by 2028 and then increasing at a more moderate pace as the business matures. With the DCF projections putting e.l.f. Beauty’s estimated intrinsic value broadly in line with the current share price, it suggests the market is already pricing in a fair amount of that growth. Because rhode’s Sephora rollout across 19 European markets could support higher long term brand monetisation if execution goes well, the key question for you is whether that expansion justifies paying roughly intrinsic value today or waiting for a wider gap to open up. Find out what e.l.f. Beauty could be worth using our Discounted Cash Flow (DCF) estimate.
The e.l.f. Beauty Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where the cash flow puzzle for e.l.f. Beauty leaves off, by spelling out which paths for growth, margins and earnings would need to play out for the share price to sit meaningfully above or below where it trades today, and they live on Simply Wall St's Community page. Rather than stopping at a single multiple or model, each Narrative lays out the assumptions behind its view of fair value so you can track how those inputs stack up against future reported results.
Community views on e.l.f. Beauty split between those who see more upside left in the story and those who think expectations already run hot.
Bull case: 18% undervalued
"The rhode acquisition is poised to be a transformational growth driver as e.l.f. scales a highly profitable, digitally native brand from $200 million in DTC revenue to global omnichannel scale..."
Discover why this Narrative puts e.l.f. Beauty at 18% undervalued.
Bear case: roughly fairly valued
"Ongoing high marketing and SG&A spending, with adjusted SG&A already at 54% of net sales and marketing guided to the high end of 23% to 25% of net sales, may not translate into enough incremental revenue..."
Explore why this Narrative puts e.l.f. Beauty at roughly fairly valued.
For e.l.f. Beauty, who steers the ship may matter as much as the price
Valuation models only tell part of the story, because the people choosing where to invest each dollar and how they are rewarded for it can heavily influence what happens next. See who runs e.l.f. Beauty and how they are paid.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com