Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. For example, the e.l.f. Beauty, Inc. (NYSE:ELF) share price had more than doubled in just one year - up 185%. Also pleasing for shareholders was the 12% gain in the last three months. But this could be related to the strong market, which is up 7.8% in the last three months. And shareholders have also done well over the long term, with an increase of 36% in the last three years.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year e.l.f. Beauty saw its earnings per share (EPS) increase strongly. We don't think the exact number is a good guide to the sustainable growth rate, but we do think this sort of increase is impressive. So we'd expect to see the share price higher. Strong growth like this can be evidence of a fundamental inflection point in the business, making it a good time to investigate the stock more closely.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We're pleased to report that e.l.f. Beauty rewarded shareholders with a total shareholder return of 185% over the last year. That gain actually surpasses the 11% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand e.l.f. Beauty better, we need to consider many other factors. For example, we've discovered 3 warning signs for e.l.f. Beauty (1 is potentially serious!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. 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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