Investors are more bullish on elf Beauty (NYSE: ELF) this week as stock rises 5.7%, despite declining earnings trend over past three years


It might sound bad, but the worst that can happen when you buy a stock (without leverage) is that its stock price goes to zero. But when you choose a business that is truly successful, you can Make more than 100%. Namely, the Beauty Elf, Inc. The stock price (NYSE: ELF) has jumped 197% in the past three years. How nice to those who held the stock! On top of that, the share price rose 17% in about a quarter.

Given that the stock added US $ 90 million to its market cap in the past week alone, let’s see if the underlying performance has generated any long-term returns.

It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. An imperfect but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.

During the three years of share price growth, elf Beauty has seen its earnings per share (EPS) fall by 27% per year.

This means that the market is unlikely to judge the company based on earnings growth. Since the change in EPS doesn’t seem to correlate with the change in the stock price, it’s worth taking a look at other metrics.

It could be that the revenue growth of 7.1% per year is seen as proof that Elf Beauty is growing. If the business is run for the long term good, today’s shareholders might be right to hang on.

The image below shows how revenue and income have tracked over time (if you click on the image you can see more details).

NYSE: ELF Earnings and Revenue Growth October 30, 2021

elf Beauty is a well-known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are planning to buy or sell elf Beauty shares, you should check this out free report showing analysts’ consensus estimates for future earnings.

A different perspective

It is nice to see that elf Beauty shareholders have received a total shareholder return of 59% over the past year. As the 1-year TSR is better than the 5-year TSR (the latter standing at 4% per year), it seems that the stock’s performance has improved in recent times. At the best of times, this can portend real business momentum, meaning that now may be a good time to dig deeper. It is always interesting to follow the evolution of stock prices over the long term. But to better understand the beauty of the elves, there are many other factors that we need to take into account. Take risks, for example – elf Beauty a 5 warning signs we think you should be aware.

But beware : elf Beauty might not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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