Thank you for the report Happyhunting
i have been reading that investors are becoming margin sensitive as multiple companies are reporting pressure on profit margins from reduced pricing and competition, increased costs, and supply chain issues…
Looks like elf may not be immune from these margin pressures as this article describes:
e.l.f. has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.4% over the last two years, better than the broader consumer staples sector.
Taking a step back, we can see that e.l.f.'s margin dropped by 10.2 percentage points during that time. e.l.f.'s two-year free cash flow profile was compelling, but shareholders are surely hoping for its trend to reverse. Continued declines could signal that the business is becoming more capital-intensive.
e.l.f. broke even from a free cash flow perspective in Q2. The company’s cash profitability regressed as it was 10.4 percentage points lower than in the same quarter last year, which isn’t ideal considering its longer-term trend.
i still feel most positive about the company and consumers resilience, especially in this category with the lipstick effect, and have no intention of reducing my holdings … if an opportunity presents i may add and as you suggest it is a resilient company with innovative management delivering a strong quarter.
Best, kevin c