Intrinsic value of e.l.f. Beauty - ELF

Previous Close

$12.89

  Intrinsic Value

$8.99

stock screener

  Rating & Target

sell

-30%

Previous close

$12.89

 
Intrinsic value

$8.99

 
Up/down potential

-30%

 
Rating

sell

We calculate the intrinsic value of ELF stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.32
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.42
  5.37
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
Revenue, $m
  294
  318
  344
  371
  399
  427
  457
  489
  521
  555
  590
  626
  664
  704
  745
  789
  834
  881
  930
  981
  1,034
  1,090
  1,149
  1,210
  1,275
  1,342
  1,412
  1,486
  1,563
  1,644
Variable operating expenses, $m
  216
  232
  249
  266
  284
  303
  322
  342
  363
  385
  381
  405
  430
  455
  482
  510
  539
  569
  601
  634
  669
  705
  743
  782
  824
  867
  913
  961
  1,011
  1,063
Fixed operating expenses, $m
  37
  38
  38
  39
  40
  41
  42
  43
  44
  45
  46
  47
  48
  49
  50
  51
  52
  53
  54
  56
  57
  58
  59
  61
  62
  63
  65
  66
  68
  69
Total operating expenses, $m
  253
  270
  287
  305
  324
  344
  364
  385
  407
  430
  427
  452
  478
  504
  532
  561
  591
  622
  655
  690
  726
  763
  802
  843
  886
  930
  978
  1,027
  1,079
  1,132
Operating income, $m
  41
  49
  57
  65
  74
  84
  93
  104
  114
  125
  163
  175
  187
  200
  214
  228
  243
  258
  274
  291
  309
  327
  347
  367
  389
  411
  434
  459
  485
  512
EBITDA, $m
  75
  84
  93
  102
  112
  122
  133
  144
  155
  167
  180
  193
  206
  220
  235
  250
  266
  283
  301
  319
  338
  358
  380
  402
  425
  449
  475
  501
  529
  559
Interest expense (income), $m
  12
  9
  10
  11
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  39
  41
  43
  46
  49
  51
  54
  57
  61
  64
  67
Earnings before tax, $m
  32
  39
  46
  54
  61
  69
  78
  86
  96
  105
  141
  152
  162
  174
  185
  198
  210
  224
  238
  252
  268
  284
  301
  319
  337
  357
  377
  398
  421
  445
Tax expense, $m
  9
  11
  12
  14
  17
  19
  21
  23
  26
  28
  38
  41
  44
  47
  50
  53
  57
  60
  64
  68
  72
  77
  81
  86
  91
  96
  102
  108
  114
  120
Net income, $m
  23
  28
  34
  39
  45
  51
  57
  63
  70
  77
  103
  111
  118
  127
  135
  144
  154
  163
  174
  184
  196
  207
  220
  233
  246
  260
  275
  291
  307
  325

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  454
  492
  532
  573
  616
  661
  707
  755
  805
  858
  912
  968
  1,027
  1,088
  1,152
  1,219
  1,288
  1,361
  1,437
  1,516
  1,599
  1,685
  1,776
  1,871
  1,970
  2,074
  2,183
  2,296
  2,416
  2,541
Adjusted assets (=assets-cash), $m
  454
  492
  532
  573
  616
  661
  707
  755
  805
  858
  912
  968
  1,027
  1,088
  1,152
  1,219
  1,288
  1,361
  1,437
  1,516
  1,599
  1,685
  1,776
  1,871
  1,970
  2,074
  2,183
  2,296
  2,416
  2,541
Revenue / Adjusted assets
  0.648
  0.646
  0.647
  0.647
  0.648
  0.646
  0.646
  0.648
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.648
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
  0.647
Average production assets, $m
  164
  178
  192
  207
  223
  239
  256
  273
  291
  310
  330
  350
  371
  394
  417
  441
  466
  492
  520
  548
  578
  610
  642
  677
  712
  750
  789
  831
  874
  919
Working capital, $m
  77
  83
  90
  97
  104
  112
  120
  128
  137
  145
  155
  164
  174
  184
  195
  207
  218
  231
  244
  257
  271
  286
  301
  317
  334
  352
  370
  389
  410
  431
Total debt, $m
  176
  196
  217
  240
  263
  286
  311
  337
  364
  392
  421
  451
  482
  515
  549
  585
  622
  661
  702
  744
  788
  835
  883
  934
  987
  1,042
  1,101
  1,162
  1,225
  1,292
Total liabilities, $m
  243
  263
  285
  307
  330
  353
  378
  404
  431
  459
  488
  518
  549
  582
  616
  652
  689
  728
  769
  811
  855
  902
  950
  1,001
  1,054
  1,109
  1,168
  1,229
  1,292
  1,359
Total equity, $m
  211
  229
  247
  267
  286
  307
  329
  351
  375
  399
  424
  450
  478
  506
  536
  567
  599
  633
  668
  705
  743
  784
  826
  870
  916
  964
  1,015
  1,068
  1,123
  1,182
Total liabilities and equity, $m
  454
  492
  532
  574
  616
  660
  707
  755
  806
  858
  912
  968
  1,027
  1,088
  1,152
  1,219
  1,288
  1,361
  1,437
  1,516
  1,598
  1,686
  1,776
  1,871
  1,970
  2,073
  2,183
  2,297
  2,415
  2,541
Debt-to-equity ratio
  0.830
  0.860
  0.880
  0.900
  0.920
  0.930
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.030
  1.040
  1.040
  1.050
  1.060
  1.060
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
Adjusted equity ratio
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23
  28
  34
  39
  45
  51
  57
  63
  70
  77
  103
  111
  118
  127
  135
  144
  154
  163
  174
  184
  196
  207
  220
  233
  246
  260
  275
  291
  307
  325
Depreciation, amort., depletion, $m
  35
  35
  36
  37
  38
  39
  39
  40
  41
  42
  17
  18
  19
  20
  21
  22
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
  45
  47
Funds from operations, $m
  58
  64
  70
  76
  82
  89
  96
  103
  111
  119
  120
  129
  137
  147
  157
  167
  177
  188
  200
  212
  225
  238
  252
  267
  282
  299
  316
  333
  352
  371
Change in working capital, $m
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
Cash from operations, $m
  52
  57
  63
  69
  75
  82
  88
  95
  102
  110
  111
  119
  127
  136
  146
  155
  166
  176
  187
  199
  211
  224
  237
  251
  266
  281
  297
  314
  332
  350
Maintenance CAPEX, $m
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -42
  -45
New CAPEX, $m
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -17
  -18
  -19
  -20
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -45
Cash from investing activities, $m
  -21
  -22
  -23
  -25
  -27
  -27
  -29
  -30
  -32
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -56
  -58
  -61
  -64
  -67
  -71
  -74
  -77
  -81
  -85
  -90
Free cash flow, $m
  31
  35
  40
  44
  49
  54
  59
  65
  70
  76
  75
  82
  88
  95
  103
  110
  118
  126
  135
  144
  153
  163
  173
  184
  195
  207
  219
  232
  246
  260
Issuance/(repayment) of debt, $m
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  33
  34
  36
  37
  39
  41
  42
  44
  46
  48
  51
  53
  56
  58
  61
  64
  67
Total cash flow (excl. dividends), $m
  50
  56
  61
  66
  72
  78
  84
  91
  97
  104
  104
  112
  120
  128
  137
  146
  155
  165
  175
  186
  197
  209
  222
  235
  248
  263
  278
  293
  310
  327
Retained Cash Flow (-), $m
  -17
  -18
  -18
  -19
  -20
  -21
  -22
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  33
  38
  42
  47
  52
  57
  63
  68
  74
  80
  79
  86
  92
  100
  107
  115
  123
  131
  140
  149
  159
  169
  180
  191
  202
  214
  227
  240
  254
  269
Discount rate, %
  8.00
  8.40
  8.82
  9.26
  9.72
  10.21
  10.72
  11.26
  11.82
  12.41
  13.03
  13.68
  14.37
  15.09
  15.84
  16.63
  17.46
  18.34
  19.25
  20.22
  21.23
  22.29
  23.40
  24.57
  25.80
  27.09
  28.45
  29.87
  31.36
  32.93
PV of cash for distribution, $m
  31
  32
  33
  33
  33
  32
  31
  29
  27
  25
  21
  18
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
  1
  1
  1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

e.l.f. Beauty, Inc., formerly J.A. Cosmetics Holdings, Inc., is a cosmetic company. The Company conducts its business under the name e.l.f. Cosmetics, and offers products for eyes, lips and face to consumers through its retail customers, e.l.f. stores and e-commerce channels. The Company offers a range of products for eyes, such as eyeshadow, eyeliner, mascara and eyelashes, eyebrows, concealer and primer, brushes and tools, and sets and palettes. The Company offers lipstick, lip gloss, lipliner, and lip care and brushes. The Company launches its products on elfcosmetics.com, and distribution is generally only broadened to its retail customers after it receives consumer validation online. The Company sells its products in national and international retailers (with international primarily serviced by distributors) and direct-to-consumer channels. It sells its products in retail stores in the United States across mass, drug store, food and specialty retail channels.

FINANCIAL RATIOS  of  e.l.f. Beauty (ELF)

Valuation Ratios
P/E Ratio 116.7
Price to Sales 2.5
Price to Book 4.1
Price to Tangible Book
Price to Cash Flow 291.8
Price to Free Cash Flow -83.4
Growth Rates
Sales Growth Rate 20.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 110.6%
Total Debt to Equity 119.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 2.8%
Ret/ On Assets - 3 Yr. Avg. 1.8%
Return On Total Capital 1.7%
Ret/ On T. Cap. - 3 Yr. Avg. -0.9%
Return On Equity 3.6%
Return On Equity - 3 Yr. Avg. -1.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 57.4%
Gross Margin - 3 Yr. Avg. 51.8%
EBITDA Margin 15.2%
EBITDA Margin - 3 Yr. Avg. 12.3%
Operating Margin 10.4%
Oper. Margin - 3 Yr. Avg. 9.5%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. 0.5%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. -0.4%
Effective Tax Rate 50%
Eff/ Tax Rate - 3 Yr. Avg. 44.3%
Payout Ratio 1360%

ELF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ELF stock intrinsic value calculation we used $269.888 million for the last fiscal year's total revenue generated by e.l.f. Beauty. The default revenue input number comes from 0001 income statement of e.l.f. Beauty. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ELF stock valuation model: a) initial revenue growth rate of 8.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8%, whose default value for ELF is calculated based on our internal credit rating of e.l.f. Beauty, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of e.l.f. Beauty.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ELF stock the variable cost ratio is equal to 74.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $36 million in the base year in the intrinsic value calculation for ELF stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for e.l.f. Beauty.

Corporate tax rate of 27% is the nominal tax rate for e.l.f. Beauty. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ELF stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ELF are equal to 55.9%.

Life of production assets of 19.6 years is the average useful life of capital assets used in e.l.f. Beauty operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ELF is equal to 26.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $193.863 million for e.l.f. Beauty - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 47.582 million for e.l.f. Beauty is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of e.l.f. Beauty at the current share price and the inputted number of shares is $0.6 billion.

RELATED COMPANIES Price Int.Val. Rating
ULTA Ulta Beauty 313.13 199.58  hold
EL Estee Lauder C 144.84 203.54  str.buy
REV Revlon Cl A 28.11 0.02  str.sell
SBH Sally Beauty H 20.31 7.48  sell
COTY Coty Cl A 8.70 24.06  str.buy
CVS CVS Health 79.92 125.09  str.buy
AVP Avon Products 2.03 0.44  str.sell

COMPANY NEWS

▶ Company News For Nov 7, 2018   [Nov-07-18 09:44AM  Zacks]
▶ Heres Why These Five Stocks Are in the Spotlight   [Nov-06-18 07:59PM  Insider Monkey]
▶ ELF beats earnings, revenue expectations   [03:24PM  CNBC Videos]
▶ e.l.f. Beauty Q3 Earnings Preview   [07:54AM  Benzinga]
▶ e.l.f. Debuts Influencer-Designed Modern Metals Collection   [Sep-26-18 09:00AM  Business Wire]
▶ Activist investor pushes for sale or makeover at Oakland-based e.l.f. Beauty   [Sep-12-18 05:34PM  American City Business Journals]
▶ E.l.f. Beauty (ELF) Beats Q2 Earnings Estimates   [Aug-08-18 05:20PM  Zacks]
▶ Q2 Earnings Preview: e.l.f. Beauty   [09:53AM  Benzinga]
▶ Analyst: elf Beauty Positioned As Takeout Target   [Jul-02-18 12:34PM  Benzinga]
▶ Why e.l.f Beauty Inc. Stock Fell 10% in February   [Mar-05-18 05:03PM  Motley Fool]
▶ Why e.l.f. Beauty Stock Is Falling Today   [Feb-28-18 11:51AM  Motley Fool]
▶ E.L.F. Beauty shares fall on revenue outlook   [Feb-27-18 05:33PM  MarketWatch]
▶ E.L.F. Beauty slightly misses top line   [04:29PM  CNBC Videos]
▶ Cramers Exec Cut: The revival of retail   [Jan-12-18 07:07PM  CNBC Videos]
▶ E.L.F. Beauty CEO cuts long-term sales growth target   [Jan-09-18 01:52PM  CNBC Videos]
▶ e.l.f. Beauty Reconfirms Fiscal 2017 Outlook   [Jan-08-18 04:15PM  Business Wire]
▶ Cramer: Making Money on What Matters Most to Millennials   [Nov-15-17 07:01PM  TheStreet.com]
▶ E.L.F. Beauty revenues beat forecasts   [03:54PM  CNBC Videos]
▶ Elf Aquitaine SA to Host Earnings Call   [01:00PM  ACCESSWIRE]

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