It has been a roller-coaster journey for e.l.f. Magnificence (NYSE: ELF) in 2024. The inventory jumped over 50% within the first half of the 12 months earlier than plunging over 50% simply months later. And because the fiscal 2025 second-quarter earnings launch on Nov. 6, share have surged greater than 25% as administration as soon as once more raised its full-year steering.
Let’s take a better have a look at the beauty firm’s most up-to-date outcomes and prospects to see if now is an efficient time to purchase the inventory.
Gross sales proceed to surge
For its fiscal second quarter, ended Sept. 30, e.l.f. Magnificence gross sales soared 40% 12 months over 12 months to $301.1 million, simply topping the analyst consensus of $286 million (as compiled by LSEG). It stated each the retail channel and e-commerce had been sturdy.
Adjusted earnings per share (EPS), in the meantime, fell from $0.82 to $0.77 however simply surpassed the $0.43 analyst estimate. Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) elevated 9% to $146.8 million.
Profitability was impacted by elevated prices to market and assist its enterprise.
E.l.f. Magnificence as soon as once more improved its market share within the quarter with a achieve within the colour cosmetics class of 195 foundation factors to 12%, in keeping with Nielsen. Nevertheless, consumption progress of 16% in tracked channels was under the expansion of 20% it had anticipated because the class as an entire noticed a 5% decline. It attributed the weak point within the class to clients being extra selective with their spending.
The corporate continues to see fast worldwide progress with income up 91% 12 months over 12 months. It entered the German market within the quarter by way of Rossmann shops and stated it shortly turned the No. 1 model within the shops it entered.
Raised steering
E.l.f. raised its full-year fiscal 2025 steering once more with gross sales now anticipated to extend 28% to 30%, up from a previous expectation of 25% to 27% progress.
| Metric | Authentic Fiscal 2025 Outlook | Prior Fiscal 2025 Outlook | Up to date Fiscal 2025 Outlook |
|---|---|---|---|
| Internet gross 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 |
Knowledge supply: E.l.f. Magnificence.
It additionally raised its profitability forecasts with adjusted EBITDA now anticipated to be in a variety of $304 million to $308 million and adjusted EPS of $3.47 to $3.53.
Administration believes advertising leverage will enhance in fiscal This fall as its spending is extra balanced this 12 months. The corporate additionally stated any potential tariffs wouldn’t impression its present fiscal 12 months.
E.l.f. famous that the final time it handled elevated tariffs, it was in a position to get provider concessions, whereas it elevated costs on a 3rd of its product portfolio. Roughly 80% of its merchandise at the moment come from China, so it has room to diversify its provide chain as nicely.
Is e.l.f. inventory a purchase?
E.l.f. has been probably the greatest progress tales within the client merchandise house the previous a number of years. It has taken the mass cosmetics class by storm, claiming a big quantity of market share from incumbent manufacturers. This has been fueled by a mixture of extra inexpensive merchandise and the usage of influencers to draw youthful clients.
In the meantime, the corporate has alternatives to develop each internationally and inside the adjoining skincare class. Internationally, the corporate is seeing nice early success. In the meantime, it acquired skincare model Naturium in Oct. 2023 to bolster its presence in that market. Finally, it might additionally resolve to enter different classes corresponding to perfume.
Turning to valuation, e.l.f. trades at a forward price-to-earnings ratio (P/E) of 31 instances based mostly on fiscal 2026 estimates. Its price/earnings-to-growth ratio (PEG ratio) is simply 0.6 with a PEG underneath 1 often thought of undervalued. And progress shares usually command PEG multiples which might be far larger.
Knowledge by YCharts.
Whereas there are some worries concerning the impression of potential tariffs on the corporate, e.l.f. has handled such challenges earlier than whereas persevering with to develop gross sales and market share.
At the moment, e.l.f.’s valuation could be very enticing for what nonetheless appears like probably the greatest client progress inventory tales on the market. As such, I might be a purchaser of the inventory right now.
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Geoffrey Seiler has positions in e.l.f. Magnificence. The Motley Idiot has positions in and recommends e.l.f. Magnificence. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
