e.l.f.(US:ELF) Yahoo Finance·2026-01-11 15:24Core Insights - e.l.f. Beauty's shares dropped 39.4% in 2025, reflecting slowing growth and high earnings multiples, leading to poor stock performance [1] - The stock is down 60% from its all-time highs, indicating significant market challenges [1] Revenue Growth - e.l.f. Beauty has historically gained market share in beauty categories, but revenue growth began to stagnate in 2025 [2] - The company expects to generate $200 million in revenue from its acquisition of Rhode in the 2026 fiscal year, projecting overall growth of 18%-20%. However, organic revenue growth is anticipated to be only 3%-4% this fiscal year, a notable slowdown [3] Profitability and Margins - The gross margin for e.l.f. Beauty has decreased from 68% to 66%, suggesting the need for inventory discounts to stimulate sales, which is a negative indicator for the business [4] - Despite a 14% revenue growth last quarter, operating income fell to $7.7 million due to increased marketing expenses, highlighting declining earnings amid slowing revenue growth [6] Valuation and Debt - e.l.f. Beauty's price-to-earnings (P/E) ratio remains high at 62, even after a significant stock price drop, raising concerns about its valuation given the slowing organic revenue growth [6] - The company has incurred $600 million in debt to finance the $1 billion acquisition of Rhode, with only $100 million in free cash flow, indicating a long repayment timeline [7]