Zacks Investment Ideas feature highlights: e.l.f. Beauty
For Immediate Release
Chicago, IL – October 24, 2022 – Today, Zacks Investment Ideas feature highlights e.l.f. Beauty, Inc. ELF.
The e.l.f. on the Shelf: Finding the Beauty in Cosmetics
One of the great joys in adulthood is watching our young population grow and experience the beauty of life. The Elf on the Shelf is a popular children's book that follows an elf whose job is to keep an eye on children for Santa. In the Christmas-themed story, the elf reports back to Santa about which children are being naughty or nice, or so the story goes.
We can learn much from this theme about identifying top stocks in this environment. As investors, it's our job to keep a close eye on our individual stock holdings, rewarding our portfolios with stocks that have been nice and are showing strength. We've seen throughout this year as well as previous bear markets that cosmetics – in particular women's makeup and skin care – have proven to be somewhat recession-proof.
Part of the Consumer Staples sector, the Zacks Cosmetics industry is currently ranked in the top 35% out of over 250 industries. Quantitative research has illustrated that roughly half of a stock's future price movement can be attributed to its industry group. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
By focusing on stocks within the top industries, we can provide a constant 'tailwind' to our investing success. Let's take a closer look at a Zacks Rank #1 (Strong Buy) stock that is outperforming the market and recently hit new 52-week highs, all while the major averages hover in deep correction.
e.l.f. Beauty, Inc.
e.l.f. Beauty is a global provider of cosmetic and skin care products under the e.l.f. Cosmetics, e.l.f. Skin, Well People, and Keys Soulcare brand names. The company offers eye, lip, face, and skin care products. ELF sells these items through national and international retailers and direct-to-consumer channels, including e-commerce platforms.
ELF has surpassed earnings estimates in each of the past four quarters, delivering a trailing four-quarter average earnings surprise of 76.95%. The company most recently reported fiscal Q1 EPS back in August of $0.39/share, a 69.57% beat over the $0.23 consensus estimate. The stock has responded well and has advanced nearly 21% this year.
Analysts have increased their EPS estimates for ELF recently. For the fiscal second quarter, estimates have been revised upward by 7.14% in the past 30 days. The Q2 Zacks Consensus Estimate is now $0.15 per share, with sales expected to grow 15.1% to $105.74 million during the quarter.
What the Zacks Model Unveils
The Zacks Earnings ESP (Expected Surprise Prediction) identifies companies that have recently witnessed positive earnings estimate revision activity. The idea is that this more recent information can serve as a better predictor of the future, giving investors a leg up during earnings season. When combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
With an Earnings ESP +7.58% and a Zacks Rank #1 (Strong Buy) rating, another earnings beat may be in the cards for ELF investors when the company reports fiscal Q2 results on November 2nd.
With a best-in-class 'A' rating in each of our Zacks Growth and Momentum Style Score categories, it's not difficult to see why ELF is a compelling investment. Make sure to keep an eye on ELF as well as the cosmetics industry.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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