The stock of e.l.f. Beauty Inc (ELF, Financial) has seen a daily loss of 10.73%, and a 3-month loss of 21.25%. Despite these losses, the company posted an Earnings Per Share (EPS) (EPS) of 1.77. But the question remains: Is the stock significantly overvalued? This article provides an in-depth analysis of e.l.f. Beauty's valuation, financial strength, profitability, and growth. We invite you to read on for a comprehensive understanding of the company's market value.
Company Introduction
e.l.f. Beauty Inc is a leading cosmetic company based in the United States. The company offers a wide range of cosmetic accessories, including eyeliner, mascara, false eyelashes, lipstick, foundation, moisturizer, cleanser, and other tools. These products are marketed under the e.l.f. Cosmetics, W3LL PEOPLE, and Keys Soulcare brands, and are available through its stores and e-commerce channels. The majority of the company's revenue is generated from the US.
Currently, e.l.f. Beauty (ELF, Financial) is trading at $92.09 per share, with a market cap of $5.10 billion. When compared to the GuruFocus Value (GF Value) of $60.83, the stock appears to be significantly overvalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at.
For e.l.f. Beauty, the GF Value suggests that the stock is significantly overvalued. This is due to the stock's current price being considerably above the GF Value Line. As a result, the future return of e.l.f. Beauty's stock is likely to be much lower than its future business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before deciding to buy its stock. A good starting point is to look at the cash-to-debt ratio and interest coverage. e.l.f. Beauty has a cash-to-debt ratio of 1.79, which ranks better than 69.67% of companies in the Consumer Packaged Goods industry. This indicates that the financial strength of e.l.f. Beauty is strong.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. e.l.f. Beauty has been profitable 8 out of the past 10 years, indicating fair profitability. Over the past twelve months, the company had a revenue of $672.60 million and an EPS of $1.77. Its operating margin is 15.96%, which ranks better than 87.04% of companies in the Consumer Packaged Goods industry.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of e.l.f. Beauty is 23.4%, which ranks better than 85.44% of companies in the Consumer Packaged Goods industry. The 3-year average EBITDA growth is 15.6%, which ranks better than 65.25% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way of determining its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, e.l.f. Beauty's ROIC is 25.38, and its WACC is 8.89.
Conclusion
In summary, the stock of e.l.f. Beauty (ELF, Financial) appears to be significantly overvalued. The company's financial condition is strong, its profitability is fair, and its growth ranks better than 65.25% of companies in the Consumer Packaged Goods industry. To learn more about e.l.f. Beauty stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
