Investing in e.l.f. Beauty (NYSE:ELF) five years ago would have delivered you a 369% gain

Some e.l.f. Beauty, Inc. (NYSE:ELF) shareholders are probably rather concerned to see the share price fall 42% over the last three months. But that does not change the realty that the stock's performance has been terrific, over five years. In that time, the share price has soared some 369% higher! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 60% decline over the last twelve months.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, e.l.f. Beauty managed to grow its earnings per share at 207% a year. The EPS growth is more impressive than the yearly share price gain of 36% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that e.l.f. Beauty has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Investors in e.l.f. Beauty had a tough year, with a total loss of 60%, against a market gain of about 20%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 36%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with e.l.f. Beauty .

Of course e.l.f. Beauty may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.