What You Need to Know About e.l.f. Beauty (ELF)

The cosmetics company has reported upbeat earnings during the COVID-19 pandemic

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e.l.f Beauty, Inc. (NYSE:ELF) is a cosmetics company based out of Oakland, California. The company supplies its products worldwide and is well-known for its inexpensive but high-quality products, and its strong online presence. The cosmetics company has performed fairly well with its revenue and net income throughout the pandemic, but that success is yet to be reflected in ELF's stock price. ELF is trading up 37% year-to-date, and has yet to surpass the $30 range, which is essentially the price of ELF stock when the company first went public. Nonetheless, ELF is up nearly 300% from its 52-week low of $7.58. The stock has also seen a 52-week high of $22.14, but the company is looking post-earnings pop from next week's quarterly report, set for after the close on Nov 4.

e.l.f. beauty has a market cap of $1.03 billion and a book value of $11.03 per share. The company's price-to-book ratio stands at 4.14. e.l.f. beauty has a trailing price-earnings ratio of 65.48, and a forward price-earnings ratio of 30.77. The company's price-earnings ratio at the moment is 65.61.

e.l.f. beauty has gone four-for-four in beatings expectations on its earnings reports over the past 12 months. The fourth quarter of 2019 was e.l.f. beauty's top-performing quarter in the past 12 months. The company was expected to report an earnings per share (EPS) of $0.15, but surpassed that with a reported EPS of $0.24. In the company's most recent quarterly report, e.l.f. beauty beat its target by 325%! The cosmetics company reported an EPS of $0.17, beating expectations by a margin of $0.13. Right now, e.l.f. beauty is anticipating a drop in its EPS down to $0.13. The company has a trailing 12-month EPS of $0.31.

The beauty company has had consistent annual revenue growth since its IPO with the exception of 2018, where revenue dropped by $2 million. e.l.f. beauty has grown its revenue by nearly $60 million over the past four years. The company has produced $287.61 million in revenue in just the past 12 months.

While e.l.f. beauty has been largely inconsistent with its revenue growth, the company has maintained a positive net income since 2016. In 2017, e.l.f. beauty significantly increased its net income as compared to the $5.3 million produced in 2016. e.l.f. beauty increased net income to $33.5 million in 2017, marking a well over a 500% year-over-year increase. The following year, in 2018, e.l.f. beauty was unable maintain that explosive growth rate, and dropped its net income by more than 50%. However, the company has been able to maintain a reported net income of approximately $15 million per year since 2018.

e.l.f. beauty currently has $54.22 million in cash and $150.49 million in total debt. The company’s balance sheet holds $453.10 million in total assets and $210.93 million in total liabilities. e.l.f. beauty's total equity stands at $242.17 million.

e.l.f. beauty remains a small market cap company with the potential bigger things, but has yet to produce consistent numbers that support the idea of ongoing growth. Even with a forward price-earnings ratio of 30.77, ELF stock would be completely overpriced.

The beauty company would need to replicate the success it had in 2018 on a more consistent basis in order for ELF stock to push past its comfort zone in the $20 range. It's important to note that the fact that e.l.f. beauty has maintained positive earnings throughout the pandemic is a testament to the company’s stability. For a retail company, e.l.f. beauty revenue has been largely unaffected by the COVID-19 shutdowns, which is an impressive feat for such a small company. However, ELF stock is overpriced at the moment. Unless the company exponentially speeds up its revenue growth, anything over $15 is likely too expensive for investors to jump on ELF stock.



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