e.l.f. Beauty (ELF): Exploring Valuation After the Recent 47% Share Price Drop

e.l.f. Beauty (ELF) has seen a drop of nearly 47% over the past month, which is catching the eye of investors looking for value opportunities. The company’s declining share price sparks questions about its underlying fundamentals and potential path forward.

See our latest analysis for e.l.f. Beauty.

While e.l.f. Beauty’s share price has pulled back sharply from recent highs, putting its 1-year share price return deep in the red, the story is not entirely negative. The company still boasts an impressive 230% total shareholder return over five years. This suggests that, despite current momentum fading, the longer-term track record reflects meaningful growth for those who bought earlier.

If a changing sentiment in the beauty sector has you thinking bigger, now could be the ideal moment to see what is possible and discover fast growing stocks with high insider ownership

With the share price now well below both analyst targets and potential intrinsic value, the big question is whether e.l.f. Beauty is currently trading at a true bargain or if the market is rightly pricing in slower growth ahead.

Most Popular Narrative: 40% Undervalued

According to the most widely followed narrative, e.l.f. Beauty’s fair value sits well above the current share price. With a discount rate of 7.9%, this sizable gap highlights major expectations for growth and profitability that are not yet reflected in the stock's market value.

The expansion into new international markets and rapid growth in existing ones (for example, 30% international net sales growth, top rankings in new geographies, global Sephora rollout) provides significant runway for future revenue growth and increased diversification. This potential is likely under-appreciated by the market.

Read the complete narrative.

Want to know what is really fueling this ambitious price target? The secret lies in bold assumptions about surging overseas sales, major brand launches, and a profit margin increase that stands out from the sector norm. Interested in uncovering the projections that could reshape e.l.f. Beauty’s long-term value? The full narrative breaks down the financial drivers supporting this outlook.

Result: Fair Value of $121.71 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, uncertainty remains if tariffs rise or if aggressive marketing spend fails to deliver anticipated growth. This could put future profits and valuation at risk.

Find out about the key risks to this e.l.f. Beauty narrative.

Another View: Multiples Raise Caution

While the discounted cash flow approach points to e.l.f. Beauty being undervalued, looking at its price-to-earnings ratio paints a riskier picture. At 53.1x, it is much higher than both industry peers at 13.2x and the fair ratio of 34.3x. This substantial gap suggests the market is pricing in a lot of future growth. What happens if the company cannot deliver?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own e.l.f. Beauty Narrative

If you see the story differently or want to chart your own path, it is easy to dive into the numbers yourself and shape your own view in just a few minutes, including with Do it your way.

A great starting point for your e.l.f. Beauty research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

Looking for More Investment Ideas?

Smart investors never stop at just one opportunity. Don’t wait for the market to leave you behind; broaden your watchlist with strategies targeting the hottest sectors and profit trends right now.

• Capture powerful trends by tapping into these 31 healthcare AI stocks focused on revolutionizing medicine and driving healthcare innovation with artificial intelligence.
• Grow your capital faster with these 894 undervalued stocks based on cash flows pinpointing companies the market has overlooked, where current share prices lag behind real business value.
• Boost your income stream via these 18 dividend stocks with yields > 3% packed with stocks offering impressive yields and sustainable cash payouts above 3%.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com