e.l.f.(US:ELF) The Motley Fool·2026-02-14 15:06Core Viewpoint - The investment community is divided on whether to maintain cash reserves for opportunistic investments, but recent market conditions have allowed for new investments, particularly in e.l.f. Beauty, which shows promising growth potential [1][2]. Company Overview - e.l.f. Beauty is a consumer discretionary company that has gained attention due to its strong growth rate and popularity among consumers, particularly for its affordable beauty products [3][5]. - The company expects to grow its fiscal 2026 net sales by at least 22% year over year, with current net sales up 21% after three quarters [5]. Pricing Strategy - On August 1, e.l.f. Beauty raised its prices by approximately 15%, yet its products remain about 20% cheaper than competing mass-market brands, maintaining its position as a low-cost leader [6]. Financial Performance - e.l.f. Beauty has a market capitalization of $4.8 billion and a gross margin of 65.91%. However, profits have declined due to tariffs affecting its gross margin and the recent $1 billion acquisition of beauty brand rhode [8]. - Despite the profit decline, e.l.f. Beauty is still achieving double-digit top-line growth and navigating macroeconomic challenges while delivering profits according to GAAP [9]. Valuation Insights - The stock has seen a significant drop from its highs and currently trades at a price-to-earnings (P/E) ratio of 42, which is below its average valuation since early 2022, indicating potential for future valuation improvement if profits normalize [9][11]. Investment Rationale - e.l.f. Beauty is viewed as a growing business that generates profits and trades at a supportive valuation, making it an attractive investment opportunity for the long term [12].