The shares of this cosmetics company were initiated at Jefferies as a ‘Buy’ last month. In the company’s recent quarter, it beat analysts’ estimates by $0.04.
Eyes Lips Face (ELF)
From The Wealth Advisory
Eyes Lips Face (ELF), or, e.l.f. Cosmetics, is an international cosmetics brand that’s based in New York City. e.l.f. is dedicated to providing inexpensive, high-quality cosmetics. The company’s products all sell for $1, $3, or $6, and items include everything from bath and skincare products to professional tools, lipstick, and blushes.
Eyes Lips Face’s products project an identity that seems to be very in touch with much of the millennial generation. Not only does the company not discriminate as to who wears its makeup, but it also markets it as “cruelty-free.” That means no animal testing. The company also supports PETA’s no-fur campaign.
Back in 2004, just months after it was founded, the company donated 20% of its proceeds from one of its successful products to Win Against Breast Cancer’s research and facilities. It also gave out free “Color Therapy Packages” to breast cancer patients in inner-city hospitals in Los Angeles.
And the company’s social responsibility isn’t limited to animals and disease. In 2011, e.l.f. Cosmetics announced the “Mi & You Can Make a Difference” campaign days after the Tōhoku earthquake and tsunami disaster. The program donated 5% of all online purchases to the Red Cross for Japan’s crisis recovery initiative and helped to fund relief efforts.
But don’t think e.l.f. just sells a good feeling. It has some very well-reviewed products, too. The company has gotten rave reviews from dozens of major magazines including Glamour, Allure, Self, InStyle, and Good Housekeeping. It even got its own segment on the Style Network. And in December of 2010, Oprah featured the e.l.f. product “100 Piece Endless Eyes Pro Eyeshadow Palette” in her “O List: Holiday Edition” (Oprah’s favorite things for the holiday) in her magazine, O. The product sold entirely out of stock before the month was over.
Since its inception back in June of 2004, e.l.f. has expanded sales into 17 countries. And its lines are carried by major stores including Target and Wal-Mart. It also sells its full lineup on its website, www.elfcosmetics.com.
Just two months after going public, the stock had already shot up over 35% from its debut price on the secondary market. Enticed by growing revenues and an incredible business plan, investors were jumping on board. Unfortunately for those who bought in at the top, the excitement faded and the stock started to drop back down to IPO levels. It bottomed out at $24.03—just below its initial secondary market price—back in February. But it’s recovered some since.
Revenues are still growing at the company. Less than a full year old as a public company, and it’s already profitable. Plus, it’s beat earnings estimates every quarter it’s been publicly traded. And it’s growing earnings at an average rate of 88% a year. And thanks to the sell-off we saw earlier this year, we’ve got a chance to get in right above the initial secondary market price.
This dip was exactly what I’d been waiting for to recommend e.l.f. as a new stock in The Wealth Advisory portfolio.
As this generation continues to grow and earn, e.l.f. will grow and earn right along with it. I expect to see this company keep increasing revenues and earnings for many years to come. And I also expect to see our investment grow from single digits to triple- and maybe even quadruple-digits over the coming years.
e.l.f Cosmetics (NYSE: ELF) is a buy anywhere under $27.50, and I’ve got a 12-month price target of $35.
Briton Ryle, The Wealth Advisory, www.angelpub.com, 877-303-4529, July 2017