Is e.l.f. Beauty’s Stock Price Justified After Recent Expansion and Share Surge?

• Ever wondered if e.l.f. Beauty’s stock is actually a bargain, or just another name riding the waves of market hype? You are not alone in wanting a clear answer to whether its current price truly makes sense.
• The stock has shown serious movement lately, with a recent 5.6% jump over the last week. This follows a choppy 40.4% drop in the last month and a 38.8% slide year-to-date. The longer term three- and five-year returns still stand at 36.9% and an eye-catching 234.5% respectively.
• Investors have been buzzing after headlines of e.l.f. Beauty’s new expansion efforts and reported gains in market share compared to competitors. These developments seem to have sparked renewed optimism even as the sector undergoes some reshuffling. These updates have helped explain the recent volatility and could indicate a shift in how the market is viewing the company’s long-term prospects.
• Right now, e.l.f. Beauty scores a 3 out of 6 on our valuation checks, meaning it is undervalued by half our usual metrics. We will break down how this score is calculated using different valuation methods, and look at what might be an even better way to judge value at the end of the article.

Find out why e.l.f. Beauty's -40.8% return over the last year is lagging behind its peers.

Approach 1: e.l.f. Beauty Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model aims to estimate what a company is truly worth by projecting its future cash flows and then discounting them back to today’s value, using a reasonable rate to adjust for risk and the time value of money. This process provides a grounded, numbers-based approach for long-term investors seeking to determine fundamentals beyond just current market trends.

For e.l.f. Beauty, the DCF model uses a 2 Stage Free Cash Flow to Equity approach. The company generated $154.7 million in Free Cash Flow (FCF) over the last twelve months. According to analyst and internal projections, annual FCF is expected to grow over the next decade, with estimates reaching $206 million by 2026 and as high as $466.6 million by 2035. The projections up to 2028 are built on analyst estimates; figures beyond that are extrapolated by Simply Wall St.

Bringing these projections together, the DCF model calculates an estimated intrinsic value of $121.29 per share for e.l.f. Beauty. This suggests the stock is trading at a 38.0% discount to its intrinsic value, based on present cash flow fundamentals.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests e.l.f. Beauty is undervalued by 38.0%. Track this in your watchlist or portfolio, or discover 926 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for e.l.f. Beauty.

Approach 2: e.l.f. Beauty Price vs Earnings

The Price-to-Earnings (PE) ratio is a key valuation multiple for profitable companies like e.l.f. Beauty because it shows how much investors are willing to pay for each dollar of current earnings. It provides a straightforward snapshot that lets investors compare share prices against a company's ability to generate profit, offering a useful measure of value for businesses with reliable earnings.

However, not all PE ratios are created equal. What counts as a "normal" or "fair" PE depends on factors like the company’s expected earnings growth, its risk profile, and how stable its profits are compared to industry peers. Higher growth or lower risk often justifies a higher PE, while riskier or slower-growing companies typically command lower multiples.

Currently, e.l.f. Beauty is trading at a PE ratio of 54.83x, which is notably higher than both the personal products industry average of 21.92x and the average of its closest peers at 14.86x. At first glance, this elevated multiple might signal that the stock is expensive. That is where Simply Wall St’s "Fair Ratio" comes in. The Fair Ratio represents a proprietary assessment of what PE ratio the company deserves based on earnings growth, profit margins, risk, market capitalization, and the characteristics of its sector. For e.l.f. Beauty, the Fair Ratio is 34.22x, suggesting the current market price is running substantially above what would be considered fair based on these fundamentals.

The Fair Ratio is a more robust benchmark than simply comparing to industries or peers, as it captures more nuanced factors like growth prospects, company-specific risks, and profit efficiency. This approach helps cut through raw comparisons and gives investors a clearer foundation for making valuation judgments.

In summary, since the PE ratio of 54.83x is well above the Fair Ratio of 34.22x, e.l.f. Beauty appears overvalued by this measure.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your e.l.f. Beauty Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple yet powerful tool that allows you to define the story you believe best fits e.l.f. Beauty by combining your expectations for revenue growth, profit margins, and company developments to create your own fair value estimate, all in one place.

Narratives work by tying together the company's business story, a financial forecast based on your perspective, and a resulting fair value, putting the “why” behind the numbers. Available to everyone on Simply Wall St's Community page, Narratives make it easy and accessible for millions of investors to share, compare, and refine their outlook, no matter your experience level.

By comparing your Narrative's fair value to the current price, you get a clear signal on when the stock might be a buy or sell based on your personal logic, rather than just analyst assumptions. The best part is, Narratives are automatically updated whenever there is new news or earnings releases, so your analysis stays relevant and current.

For example, recent Narratives for e.l.f. Beauty range from the most optimistic users projecting a fair value of $165, highlighting global expansion and digital innovation, to cautious investors setting a fair value near $112 due to supply chain and margin pressures. This demonstrates how each perspective leads to a different investing conclusion.

Do you think there's more to the story for e.l.f. Beauty? Head over to our Community to see what others are saying!

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.

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