Is There Now An Opportunity In e.l.f. Beauty, Inc. (NYSE:ELF)?

While e.l.f. Beauty, Inc. (NYSE:ELF) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$194 and falling to the lows of US$102. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether e.l.f. Beauty's current trading price of US$108 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at e.l.f. Beauty’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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

What Is e.l.f. Beauty Worth?

e.l.f. Beauty appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that e.l.f. Beauty’s ratio of 49.91x is above its peer average of 26.74x, which suggests the stock is trading at a higher price compared to the Personal Products industry. But, is there another opportunity to buy low in the future? Given that e.l.f. Beauty’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of e.l.f. Beauty look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. e.l.f. Beauty's earnings over the next few years are expected to increase by 96%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ELF’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ELF should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ELF for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ELF, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into e.l.f. Beauty, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of e.l.f. Beauty.

If you are no longer interested in e.l.f. Beauty, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.