ELF has also quickly gained in popularity due to its plant-based, animal-testing-free products.
ELF Beauty: Strong Revenue, Earnings Record
The Oakland, Calif.-based company runs four brands: ELF Cosmetics, ELF Skin, Well People and Keys. Sales grew for the 15th straight quarter in the period ended September 30. Revenue from its plant-powered products grew 33% to $122.3 million through the company’s retail and e-commerce channels.
Earnings performance has been a little more choppy. Earnings per share of 36 cents showed strong 71% growth in the September quarter. But EPS is forecast to drop 5% in the fiscal third quarter, according to FactSet. Cash on hand at the end of the quarter was $85 million, more than double the year-ago level of $42 million.
The cosmetics company gave an upbeat outlook for the year ending in March 2023. Management now anticipates sales growth of 22%- 24%, revised upward from 14%-16%.
Jefferies analysts believe that the company’s sales are more dependent on China’s markets than its peers. ELF Beauty’s 100% cruelty-free policy keeps its products out of China since animal testing is required by law there.
Morgan Stanley analyst Dara Mohsenian, JPMorgan’s Andrea Teixiera and Piper Sandler’s Erinn Murphy have an overweight rating on the stock. Raymond James’ Olivia Tang rates the stock an outperform.
Mohsenian and Tang had a price target of $50 while Teixiera had a lower target of $48 for the stock. Shares of the makeup stock have surged past 50 after earnings on Nov. 2. Murphy has a price target of 55.
Cosmetics Global Market Growth
In online sales, Elfcosmetics.com faces competition from Sephora.com and to a lesser extent from Ulta.com.
Private equity firm TPG Growth in 2014 acquired a majority stake in the makeup company. The company raised $141 million in its IPO in 2016. In 2020, ELF Beauty bought W3LL for $27 million in cash. W3LL has a strong record of being cruelty-free and using plant products.
Makeup Company’s ESG Track Record
ELF Beauty boasts of being an ESG play that is 100% free of animal testing and is certified as cruelty free by People For The Ethical Treatment of Animals (PETA). The makeup business also claims a “clean” profile. To claim that, it stays away from more than 1,600 ingredients such as parabens, phthalates and sulfates that are restricted by the FDA and the European Union Cosmetic Regulation.
ELF also offers 40 Environmental Working Group (EWG) Verified products, the industry standard for “clean and healthy” beauty products. According to Chairman and CEO Tarang Amin, the makeup company reformulated over 350 stock keeping units, or SKUs, to comply with its standards of “clean.”
In August, its third-party manufacturing facility became Fair Trade Certified. Fair Trade standards “promote sustainable livelihoods and safe working conditions for factory employees, protection of the environment and transparent supply chain.”
Strong Teen Appeal
ELF Beauty has a strong presence on TikTok and Twitch. Consumers age 18 to 24 accounted for 32% of visitors to Elfcosmetics.com, followed by age 25 to 34 at 24% of visitors.