Should You Think About Buying e.l.f. Beauty, Inc. (NYSE:ELF) Now?

By
Simply Wall St
Published
May 07, 2022
NYSE:ELF
Source: Shutterstock

e.l.f. Beauty, Inc. (NYSE:ELF), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$29.78 and falling to the lows of US$22.79. 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$22.85 reflective of the actual value of the small-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.

Check out our latest analysis for e.l.f. Beauty

What is e.l.f. Beauty worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.88% above my intrinsic value, which means if you buy e.l.f. Beauty today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $22.21, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will e.l.f. Beauty generate?

earnings-and-revenue-growth
NYSE:ELF Earnings and Revenue Growth May 7th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 57%, 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 around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ELF, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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. In terms of investment risks, we've identified 2 warning signs with e.l.f. Beauty, and understanding these should be part of your investment process.

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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