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e.l.f. Beauty (ELF) Hits Fresh High: Is There Still Room to Run?

Zacks Equity Research
·4 min read

Have you been paying attention to shares of e.l.f. Beauty (ELF)? Shares have been on the move with the stock up 24.6% over the past month. The stock hit a new 52-week high of $94.03 in the previous session. e.l.f. Beauty has gained 67.4% since the start of the year compared to the 2.3% move for the Zacks Consumer Staples sector and the 7.9% return for the Zacks Cosmetics industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 1, 2023, e.l.f. Beauty reported EPS of $0.48 versus consensus estimate of $0.23 while it beat the consensus revenue estimate by 20.29%.

For the current fiscal year, e.l.f. Beauty is expected to post earnings of $1.62 per share on $546.55 million in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $1.98 per share on $637.75 million in revenues. This represents a year-over-year change of 13.45% and 16.69%, respectively.

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Valuation Metrics

e.l.f. Beauty may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

e.l.f. Beauty has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 57.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 36.8X. On a trailing cash flow basis, the stock currently trades at 84.4X versus its peer group's average of 16X. Additionally, the stock has a PEG ratio of 1.79. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, e.l.f. Beauty currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if e.l.f. Beauty passes the test. Thus, it seems as though e.l.f. Beauty shares could have potential in the weeks and months to come.

How Does ELF Stack Up to the Competition?

Shares of ELF have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Nu Skin Enterprises, Inc. (NUS). NUS has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of D.

Earnings were strong last quarter. Nu Skin Enterprises, Inc. beat our consensus estimate by 67.92%, and for the current fiscal year, NUS is expected to post earnings of $2.58 per share on revenue of $2.1 billion.

Shares of Nu Skin Enterprises, Inc. have gained 5.1% over the past month, and currently trade at a forward P/E of 15.86X and a P/CF of 9.26X.

The Cosmetics industry is in the top 25% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ELF and NUS, even beyond their own solid fundamental situation.

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Zacks Investment Research