It's been a roller-coaster ride for e.l.f. Beauty(NYSE: ELF) in 2024. The stock jumped over 50% in the first half of the year before plunging over 50% just months later. And since the fiscal 2025 second-quarter earnings release on Nov. 6, share have surged more than 25% as management once again raised its full-year guidance.
Let's take a closer look at the cosmetic company's most recent results and prospects to see if now is a good time to buy the stock.
Sales continue to surge
For its fiscal second quarter, ended Sept. 30, e.l.f. Beauty sales soared 40% year over year to $301.1 million, easily topping the analyst consensus of $286 million (as compiled by LSEG). It said both the retail channel and e-commerce were strong.
Adjusted earnings per share (EPS), meanwhile, fell from $0.82 to $0.77 but easily surpassed the $0.43 analyst estimate. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 9% to $146.8 million.
Profitability was impacted by increased costs to market and support its business.
E.l.f. Beauty once again improved its market share in the quarter with a gain in the color cosmetics category of 195 basis points to 12%, according to Nielsen. However, consumption growth of 16% in tracked channels was below the growth of 20% it had expected as the category as a whole saw a 5% decline. It attributed the weakness in the category to customers being more selective with their spending.
The company continues to see rapid international growth with revenue up 91% year over year. It entered the German market in the quarter through Rossmann stores and said it quickly became the No. 1 brand in the stores it entered.
Raised guidance
E.l.f. raised its full-year fiscal 2025 guidance again with sales now expected to increase 28% to 30%, up from a prior expectation of 25% to 27% growth.
| Metric | Original Fiscal 2025 Outlook | Prior Fiscal 2025 Outlook | Updated Fiscal 2025 Outlook |
|---|---|---|---|
Net sales | $1.230 billion to $1.250 billion | $1.280 billion to $1.300 billion | $1.315 billion to $1.335 billion |
Adjusted EBITDA | $285 million to $289 million | $297 million to $301 million | $304 million to $308 million |
Adjusted EPS | $3.20 to $3.25 | $3.36 to $3.41 | $3.47 to $3.53 |
Data source: E.l.f. Beauty.
It also raised its profitability forecasts with adjusted EBITDA now expected to be in a range of $304 million to $308 million and adjusted EPS of $3.47 to $3.53.
Management believes marketing leverage will improve in fiscal Q4 as its spending is more balanced this year. The company also said any potential tariffs would not impact its current fiscal year.
E.l.f. noted that the last time it dealt with increased tariffs, it was able to get supplier concessions, while it increased prices on a third of its product portfolio. Approximately 80% of its products currently come from China, so it has room to diversify its supply chain as well.
Is e.l.f. stock a buy?
E.l.f. has been one of the best growth stories in the consumer products space the past several years. It has taken the mass cosmetics category by storm, claiming a significant amount of market share from incumbent brands. This has been fueled by a combination of more affordable products and the use of influencers to attract younger customers.
Meanwhile, the company has opportunities to grow both internationally and within the adjacent skincare category. Internationally, the company is seeing great early success. Meanwhile, it acquired skincare brand Naturium in Oct. 2023 to bolster its presence in that market. Eventually, it could also decide to enter other categories such as fragrance.
Turning to valuation, e.l.f. trades at a forward price-to-earnings ratio (P/E) of 31 times based on fiscal 2026 estimates. Its price/earnings-to-growth ratio (PEG ratio) is just 0.6 with a PEG under 1 usually considered undervalued. And growth stocks often command PEG multiples that are far higher.
Data by YCharts.
While there are some worries about the impact of potential tariffs on the company, e.l.f. has dealt with such challenges before while continuing to grow sales and market share.
At this time, e.l.f.'s valuation is very attractive for what still looks like one of the best consumer growth stock stories out there. As such, I'd be a buyer of the stock today.
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Geoffrey Seiler has positions in e.l.f. Beauty. The Motley Fool has positions in and recommends e.l.f. Beauty. The Motley Fool has a disclosure policy.
