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The Russell 2000 Index (RUT), a widely followed benchmark for small-cap companies, has been lagging the broader market’s advance over the past year. While the large cap-focused S&P 500 Index ($SPX) has gained 22.6% in the past 52 weeks, RUT is just 11.8% higher. Likewise, RUT is down more than 1% in 2024, compared to a 6.3% rally for the S&P.
However, one outperforming RUT component catching Wall Street’s eye is e.l.f. Beauty, Inc. (ELF). The stock has soared 22.6% on a YTD basis, substantially outperforming both broad-market benchmarks. Investors are buzzing about the cosmetic and skincare company, especially after its strong fiscal Q3 results and bullish analyst upgrades.
Moreover, the global Beauty & Personal Care market is booming, set to hit a whopping $646.2 billion this year and expand at a compound annual growth rate (CAGR) of 3.3% from 2024 to 2028. Plus, online sales are projected to make up almost a fifth of that by 2024. That's excellent news for e.l.f. Beauty's prospects.
So, while the large-cap players might steal the spotlight, smaller companies like e.l.f. Beauty can still make a big splash, especially in a flourishing - and relatively recession-resistant - market like beauty and skincare. Here's a closer look.
About e.l.f. Beauty Stock
With a market cap of roughly $9 billion, Oakland-based e.l.f. Beauty, Inc. (ELF) distributes cosmetic and skincare items worldwide under brand labels like e.l.f. Cosmetics, e.l.f. Skin, Well People, and Keys Soulcare.
If the stock seems a bit larger than the average RUT component, that’s because e.l.f. Beauty’s shares have rallied 83% over the past 52 weeks.
In terms of valuation, the stock is trading at 55.74 times forward earnings - which is significantly higher than the industry average and its own 5-year average, but lower than its larger-cap peer, Estee Lauder Companies (EL), which is trading at 64.95x.
e.l.f. Beauty’s Strong Q3 Beats Wall Street Projections
Shares of e.l.f. Beauty surged after the company announced its impressive fiscal Q3 results on Feb. 6, which exceeded analysts' expectations. Its top line increased by 84.9% year over year to $270.9 million, surpassing Wall Street projections by 13.4%. Adjusted EPS of $0.74 also beat analysts’ projections by 32.7%.
The company is making significant progress in international markets. Its international sales shot up by 119% in Q3 to make up about 15% of its total business, compared to 13% a year ago. The U.K. and Canada are leading the charge, but it is also spreading its wings to other countries.
Management revised its fiscal year 2024 outlook upwards, anticipating net sales to range between $980 million and $990 million, while adjusted net income is projected to be between $164 million and $166 million. Additionally, adjusted earnings per share are expected to be between $2.84 and $2.87.
Analysts tracking e.l.f. Beauty expect the company’s profit to be $2.50 per share in fiscal 2024, up 101.6% year over year, and grow another 18.8% to $2.97 for fiscal 2025.
What Do Analysts Expect for e.l.f. Beauty Stock?
Analysts are notably bullish on e.l.f. Beauty's shares, as evidenced by a recent upgrade from TD Cowen analyst Oliver Chen from a "Hold" to a "Buy” rating on April 17. This move reflects the analyst's belief that the company's recent momentum indicates a sustained long-term growth trajectory rather than a temporary phenomenon.
Moreover, Chen’s optimistic outlook on e.l.f. Beauty's shares hinge on the company’s adeptness in innovation and execution, underscored by its rapid product launch cycle - one of the fastest in the industry.
e.l.f. Beauty stock has a consensus “Strong Buy” rating, up from a "Moderate Buy" rating a month ago. Out of 15 analysts covering the stock, 11 consider ELF a “Strong Buy,” and the remaining four analysts advise a “Hold” rating.
The average analyst price target of $194.38 indicates a 9.8% upside potential from the current price level. However, the Street-high price target of $230 - reiterated earlier this month by Bank of America (BAC) - suggests a 30% upside potential.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
