Wow you said it. Thanks for bringing this one to the board. As you said, the numbers are remarkable. Here’s the last couple years, starting with the most recent quarter on the left:
ELF struggled for years to get from ~200m to ~300m in annual revenue, but after the pandemic they cruised from $318m in f2021 to $392m in f2022. But something inflected in f2023, because they soared 48% YoY to $579m revenue. The stock has of course re-rated and quadrupled in just over a year. Now we’re in Q2 of f2024 (Q1 ended in June – their fiscal calendar is weird). The last two quarters revenue has grown 75%+ YoY.
Maybe even more interesting, EPS has grown even more than revenue. GAAP EPS was up 244% in Q1, non-GAAP 182%. That’s pretty much a triple. I would expect EPS growth to be closer to revenue growth in coming quarters, though…in Q1 they were already around ~30% net margin. Still if $1.10/quarter is anything like a run rate for them, that’s 4.40/year and would mean their run rate PE is about 30. That’s a pretty nice PEG while growth is 75%+!
So how has this been happening? I think @XMFPennyWise gets it right:
ELF says in their materials that they are gaining market share vs their mass market peers like Maybelline or Covergirl, which I am told are no longer cool (while ELF is). I wonder if they’re also expanding the mass market, since some of their hot products are clones/dupes of high-end brands’ products – which ELF makes available at a fraction of the cost, of course. The social media / influencer thing seems to be really crushing it for them too. Whatever the cocktail that has led to the last several quarters’ acceleration…it’s working.
I’ve taken a position and I’m excited to see where this goes. Again, thanks for bringing it to the board, @wpr101!
Bear
PS - Next report, Q2, is their seasonally down quarter (for some reason), so sequentially revenue is actually expected to be negative. What I’ll be watching is, can they raise their FY guide anyway (like it seems they always do)?