- If you are wondering whether e.l.f. Beauty's share price still reflects its true worth after a strong multi year run, looking closely at its valuation can help put the current price into context.
- The stock last closed at US$73.41, with returns of an 11% decline over the past 7 days, a 4.4% decline over 30 days, a 5.7% decline year to date, a 7.7% gain over 1 year, 1.3% over 3 years, and a very large gain over 5 years.
- Recent price moves sit against a backdrop of ongoing interest in e.l.f. Beauty's growth story, including its position as a mass beauty brand in major retailers and online channels. Broader coverage of the company has focused on its brand momentum and expansion efforts, which helps explain why investors continue to pay close attention to where the stock is priced today.
- On our checks, e.l.f. Beauty scores 2 out of 6 on valuation, as shown in our valuation score. Next we will look at how different valuation methods line up, and then finish with a way to see all of these signals in one place.
e.l.f. Beauty scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: e.l.f. Beauty Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business might be worth today by projecting its future cash flows and then discounting those back to a present value.
For e.l.f. Beauty, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is reported at about $226.6 million, and analysts provide explicit forecasts out to 2028, where free cash flow is projected at $182 million. Beyond that, Simply Wall St extrapolates free cash flow out to 2035 using a series of annual projections between roughly $168 million and $178.6 million.
Combining these projected cash flows with a discount rate gives an estimated intrinsic value of around $53.23 per share. Compared with the recent share price of $73.41, the DCF output suggests the stock is 37.9% overvalued on this model.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests e.l.f. Beauty may be overvalued by 37.9%. Discover 48 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: e.l.f. Beauty Price vs Earnings
For a profitable company, the P/E ratio is a straightforward way to see how much you are paying for each dollar of current earnings. It is popular because it ties the share price directly to what the business is already earning today, rather than only to future estimates.
In general, higher growth expectations and lower perceived risk can support a higher P/E ratio, while slower growth and higher risk tend to justify a lower one. e.l.f. Beauty currently trades on a P/E of 41.71x. That is well above the Personal Products industry average of 19.97x and also above the peer group average of 10.56x.
Simply Wall St's Fair Ratio for e.l.f. Beauty is 41.76x. This is a proprietary estimate of what the P/E might be given factors such as the company’s earnings growth profile, its industry, profit margins, market cap and risk characteristics. Compared with simple peer or industry comparisons, the Fair Ratio aims to adjust for these specifics rather than assuming all companies deserve the same multiple. Since the actual P/E of 41.71x is very close to the Fair Ratio of 41.76x, the stock screens as priced roughly in line with this framework.
Result: ABOUT RIGHT
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Upgrade Your Decision Making: Choose your e.l.f. Beauty Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, where you write a simple story about e.l.f. Beauty, link it to your own revenue, earnings and margin assumptions, and see the fair value that falls out of that story.
A Narrative on Simply Wall St connects three pieces: your view of the business, a financial forecast based on that view, and a resulting fair value that you can compare to today’s share price to decide whether the stock looks closer to a buy, a hold, or a sell for you.
These Narratives sit on the Community page of Simply Wall St, are easy to set up, and update automatically when new information such as news, earnings or guidance is added, so your fair value view does not stay frozen in time.
For example, one e.l.f. Beauty Narrative currently assumes a fair value of US$251.03 while another uses US$85.00, and that spread shows how different investors can look at the same facts, apply different growth, margin, discount rate and P/E assumptions, and reach very different conclusions that you can weigh against the latest market price.
Do you think there's more to the story for e.l.f. Beauty? Head over to our Community to see what others are saying!
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.
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