e.l.f. Beauty delivered a robust fiscal first quarter (ended June 30) with net sales jumping 36% year-over-year to $479.4 million, significantly beating analyst consensus of $430 million. Adjusted earnings per share (EPS) nearly doubled to $1.75, or $1.07 excluding a tariff refund, also surpassing the $0.71 analyst consensus. Adjusted EBITDA soared 93% to $168 million, with a 36% increase excluding the tariff refund. Gross margin, excluding the tariff refund, rose 350 basis points. The company subsequently raised its full-year revenue outlook to $1.938 billion-$1.968 billion, representing 18% to 20% growth, up from the prior forecast of $1.835 billion-$1.865 billion (12% to 14% growth). Adjusted EPS guidance was also boosted to $3.50-$3.55, and adjusted EBITDA to $401 million-$407 million.
The strong performance was largely attributed to the acquired Rhode brand, which contributed $160 million in sales, including a record $27 million in a single day from its website after new product launches. Rhode is expanding globally, entering 19 new European markets and currently in 20% of Sephora stores worldwide, with plans for further expansion. The company is also entering the hair-care market with six new products launched at Target, targeting a $17 billion market. However, organic growth, excluding Rhode, was down in the high single digits due to factors like the lapping of previous product launches and a shift in enterprise resource software systems. The company also tested pricing, finding that about 10% of its e.l.f. brand products could benefit from lower prices.
Despite the positive financial results and raised guidance, investor skepticism emerged, leading to a 6.6% drop in stock price. Concerns centered on the sustainability of the profit surge, as a significant portion of margin improvement (1,050 basis points) came from a one-time tariff refund. Investors also questioned the core e.l.f. brand's ability to reaccelerate organic growth independently, rather than relying on acquisitions. Analysts note the balance sheet still shows elevated leverage with total debt at $834.2 million. While some analysts maintain a positive outlook, citing the growth potential of Rhode and new categories, others like Simply Wall St and Seeking Alpha suggest the stock is overvalued. e.l.f. Beauty currently trades at a P/E ratio of about 104.7x, significantly higher than the Personal Products industry average of 19.1x, with some models suggesting a fair P/E near 23.2x. The discounted cash flow (DCF) model estimates an intrinsic value of about $106 per share, very close to the current market price, implying that much of the future growth is already priced in.
