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e.l.f. Beauty (ELF) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of e.l.f. Beauty (ELF - Free Report) ? Shares have been on the move with the stock up 19.4% over the past month. The stock hit a new 52-week high of $38.17 in the previous session. e.l.f. Beauty has gained 12.1% since the start of the year compared to the -3.7% move for the Zacks Consumer Staples sector and the -29.7% return for the Zacks Cosmetics industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 3, 2022, e.l.f. Beauty reported EPS of $0.39 versus consensus estimate of $0.23 while it beat the consensus revenue estimate by 12.05%.

For the current fiscal year, e.l.f. Beauty is expected to post earnings of $0.87 per share on $456.97 million in revenues. This represents a 3.57% change in EPS on a 16.53% change in revenues. For the next fiscal year, the company is expected to earn $0.96 per share on $494.51 million in revenues. This represents a year-over-year change of 9.86% and 8.21%, respectively.

Valuation Metrics

e.l.f. Beauty may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

e.l.f. Beauty has a Value Score of D. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 42.7X current fiscal year EPS estimates, which is a premium to the peer industry average of 31.6X. On a trailing cash flow basis, the stock currently trades at 33.9X versus its peer group's average of 21.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, e.l.f. Beauty currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if e.l.f. Beauty passes the test. Thus, it seems as though e.l.f. Beauty shares could have a bit more room to run in the near term.

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