Bear of the Day: e.l.f. Beauty (ELF)

e.l.f. Beauty ELF is a cosmetic company that provides makeup, lip products, nail products, cosmetics sets/kits, beauty tools, brushes, and other similar accessories. Analysts have taken a bearish stance concerning the company’s EPS outlook, landing it into an unfavorable Zacks Rank #5 (Strong Sell).

Image Source: Zacks Investment Research

Let’s take a closer look at the company.

ELF's Growth Cools Big

ELF shares have been decimated over the past year, down nearly 70% and widely underperforming relative to the S&P 500. Quarterly results haven’t been enough to breathe life back into shares, with a big growth cooldown the primary reason for the negative sentiment. 

Image Source: Zacks Investment Research

The growth cooldown is evident in the chart below, where the values tracked represent the year-over-year percentage change in sales. Please note that these are not actual sales numbers.

Image Source: Zacks Investment Research

As we can see above, while sales growth is still strong, the cooldown has been the bigger story here, helping explain the sharp drop in shares. But while the growth has slowed, the margins picture has largely remained constructive, as shown below. Please note that the chart's values are calculated on a trailing twelve-month basis.

Image Source: Zacks Investment Research

Bottom Line

Analysts' negative earnings estimate revisions, resulting from a growth cooldown, paint a challenging picture for the company’s shares in the near term.

e.l.f. Beauty ELF is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research