e.l.f. Beauty, Inc. (ELF): A Bull Case Theory

We came across a bullish thesis on e.l.f. Beauty, Inc. on Business Invest’s Substack by Francesco Ferrari. In this article, we will summarize the bull’s thesis on ELF. e.l.f. Beauty, Inc.’s share was trading at $121.87 as of June 24^th. ELF’s trailing and forward P/E ratios were 63.47 and 32.36, respectively, according to Yahoo Finance.

e.l.f. Beauty (ELF) has delivered impressive growth metrics over the past three years, with a 15.1% sales CAGR and a striking 33.9% GAAP EPS CAGR, suggesting accelerating operating leverage. With a market cap of $6.6 billion, the stock is being evaluated against EPS-based end multiples ranging from 15x to 35x. However, the market appears to be pricing in record-level EPS levels the company has yet to reach, implying investor expectations around improved scalability and operational efficiency.

Intriguingly, while EPS projections drive most valuation models, the company’s free cash flow per share significantly exceeds reported GAAP earnings, suggesting GAAP numbers may understate true economic performance. This discrepancy likely arises from the accounting treatment of intangibles-heavy investments, which depress near-term EPS but may fuel long-term value. Historical context shows that ELF shares may have bottomed recently, offering a potentially compelling entry point, especially given the relatively low sentiment and expectations already embedded in the stock price.

This stands in contrast to other high-growth names that often trade at premium valuations. The core argument here is that while traditional EPS-based valuation may suggest ELF is priced for perfection, its robust free cash flow profile paints a different, more bullish picture. Over time, EPS is likely to converge upward with free cash flow as the benefits of past intangible investments materialize. This dynamic makes ELF a possible hidden gem for forward-looking investors who prioritize cash-based valuation metrics over conventional earnings, especially in an economy increasingly driven by intangible capital and innovation.

Previously, we covered a bullish thesis on e.l.f. Beauty, Inc. by Fierce__beast in November 2024, which highlighted the company’s strong fundamentals, strategic acquisitions, and expanding e-commerce and international presence. The company’s stock price has depreciated by approximately 0.64% since our coverage. The thesis still stands as long-term drivers remain intact. Francesco Ferrari shares a similar view but emphasizes free cash flow over GAAP EPS.

E.l.f. Beauty, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held ELF at the end of the first quarter, which was 35 in the previous quarter. While we acknowledge the risk and potential of ELF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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 Disclosure: None.