Today, e.l.f. Beauty Inc (ELF, Financial) experienced a significant daily gain of 17.64%, with a modest 3-month gain of 0.87%. With an Earnings Per Share (EPS) sitting at 2.26, investors might wonder if the stock is overvalued. This article delves into the intrinsic valuation of e.l.f. Beauty, providing a clear analysis of its financial health and market position.
Company Overview
e.l.f. Beauty Inc (ELF, Financial) is a prominent U.S.-based cosmetics company, offering a wide range of products including eyeliner, mascara, lipstick, and skincare items under brands like e.l.f. Cosmetics, W3LL PEOPLE, and Keys Soulcare. The company has established a robust presence both in physical stores and through e-commerce channels, primarily generating its revenue from the U.S. market. Despite the current stock price of $183.09 per share, the GF Value estimates the fair value at only $88.99, indicating a potential overvaluation.
Understanding GF Value
The GF Value is a proprietary measure calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. This valuation suggests that e.l.f. Beauty (ELF, Financial) is significantly overvalued, with the market cap reaching $10.20 billion. This discrepancy between the market price and the GF Value could imply a lower future return on the stock.
Financial Strength and Stability
Investing in companies with robust financial health is crucial. e.l.f. Beauty's cash-to-debt ratio is 0.25, positioning it better than 64.47% of its peers in the Consumer Packaged Goods industry. This indicates a fair balance sheet, crucial for sustaining operations and funding growth.
Profitability and Growth Prospects
e.l.f. Beauty has maintained profitability over the past decade, with an impressive operating margin of 15.81%, ranking well within its industry. The company's growth is also notable, with a revenue increase averaging 23.4% annually, surpassing 85.77% of its competitors. Such growth is a positive indicator for potential investors.
Evaluating ROIC and WACC
A critical analysis of e.l.f. Beauty's financial metrics reveals that its Return on Invested Capital (ROIC) is 26.05, significantly higher than its Weighted Average Cost of Capital (WACC) of 11.52. This suggests that the company is effectively creating value for its shareholders, as it generates higher returns on investment than the costs of its capital.
Conclusion
While e.l.f. Beauty (ELF, Financial) displays strong financials and growth potential, its current market price significantly exceeds the GF Value, indicating it is overvalued. Investors should consider this analysis carefully and monitor potential market adjustments. For further insights into e.l.f. Beauty's financials and stock performance, explore 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.
