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

Previous Close

$9.33

  Intrinsic Value

$9.75

stock screener

  Rating & Target

hold

+5%

Previous close

$9.33

 
Intrinsic value

$9.75

 
Up/down potential

+5%

 
Rating

hold

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 0.5

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  272
  279
  286
  294
  303
  312
  323
  335
  347
  360
  375
  390
  406
  423
  441
  461
  481
  503
  526
  550
  575
  602
  631
  661
  692
  725
  760
  797
  835
  876
Variable operating expenses, $m
  238
  243
  249
  255
  262
  269
  278
  287
  296
  307
  292
  304
  317
  330
  344
  359
  375
  392
  410
  429
  449
  470
  492
  515
  540
  566
  593
  621
  652
  683
Fixed operating expenses, $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 operating expenses, $m
  238
  243
  249
  255
  262
  269
  278
  287
  296
  307
  292
  304
  317
  330
  344
  359
  375
  392
  410
  429
  449
  470
  492
  515
  540
  566
  593
  621
  652
  683
Operating income, $m
  34
  36
  37
  39
  41
  43
  45
  48
  51
  54
  82
  86
  89
  93
  97
  101
  106
  111
  116
  121
  127
  132
  139
  145
  152
  159
  167
  175
  184
  193
EBITDA, $m
  70
  71
  73
  75
  77
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  129
  135
  141
  147
  154
  161
  169
  177
  186
  194
  204
  214
  224
Interest expense (income), $m
  12
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  14
  14
  15
  16
  17
  18
  18
  19
  20
  21
  23
  24
  25
  26
  28
  29
  31
Earnings before tax, $m
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  71
  73
  76
  79
  83
  86
  90
  94
  98
  103
  107
  112
  117
  123
  128
  134
  141
  147
  154
  162
Tax expense, $m
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  19
  20
  21
  21
  22
  23
  24
  25
  26
  28
  29
  30
  32
  33
  35
  36
  38
  40
  42
  44
Net income, $m
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  51
  54
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118

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
  426
  436
  447
  460
  474
  489
  506
  524
  543
  564
  586
  610
  635
  662
  691
  721
  753
  787
  823
  861
  901
  943
  987
  1,034
  1,083
  1,135
  1,189
  1,247
  1,307
  1,371
Adjusted assets (=assets-cash), $m
  426
  436
  447
  460
  474
  489
  506
  524
  543
  564
  586
  610
  635
  662
  691
  721
  753
  787
  823
  861
  901
  943
  987
  1,034
  1,083
  1,135
  1,189
  1,247
  1,307
  1,371
Revenue / Adjusted assets
  0.638
  0.640
  0.640
  0.639
  0.639
  0.638
  0.638
  0.639
  0.639
  0.638
  0.640
  0.639
  0.639
  0.639
  0.638
  0.639
  0.639
  0.639
  0.639
  0.639
  0.638
  0.638
  0.639
  0.639
  0.639
  0.639
  0.639
  0.639
  0.639
  0.639
Average production assets, $m
  153
  156
  160
  165
  170
  175
  181
  188
  195
  202
  210
  219
  228
  237
  248
  259
  270
  282
  295
  309
  323
  338
  354
  371
  388
  407
  426
  447
  469
  491
Working capital, $m
  59
  60
  61
  63
  65
  67
  69
  72
  75
  77
  81
  84
  87
  91
  95
  99
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
  163
  171
  180
  188
Total debt, $m
  154
  159
  164
  170
  177
  184
  192
  200
  210
  219
  230
  241
  253
  266
  279
  293
  308
  324
  341
  359
  378
  398
  419
  441
  464
  488
  514
  541
  569
  599
Total liabilities, $m
  201
  205
  211
  217
  223
  230
  238
  247
  256
  266
  276
  287
  299
  312
  325
  340
  355
  371
  388
  405
  424
  444
  465
  487
  510
  534
  560
  587
  616
  646
Total equity, $m
  225
  231
  237
  243
  251
  259
  268
  277
  287
  298
  310
  323
  336
  350
  365
  381
  398
  416
  435
  455
  476
  499
  522
  547
  573
  600
  629
  660
  691
  725
Total liabilities and equity, $m
  426
  436
  448
  460
  474
  489
  506
  524
  543
  564
  586
  610
  635
  662
  690
  721
  753
  787
  823
  860
  900
  943
  987
  1,034
  1,083
  1,134
  1,189
  1,247
  1,307
  1,371
Debt-to-equity ratio
  0.690
  0.690
  0.690
  0.700
  0.710
  0.710
  0.720
  0.720
  0.730
  0.740
  0.740
  0.750
  0.750
  0.760
  0.760
  0.770
  0.770
  0.780
  0.780
  0.790
  0.790
  0.800
  0.800
  0.810
  0.810
  0.810
  0.820
  0.820
  0.820
  0.830
Adjusted equity ratio
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19
  20
  21
  22
  23
  24
  26
  27
  29
  31
  51
  54
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  98
  103
  108
  113
  118
Depreciation, amort., depletion, $m
  35
  36
  36
  36
  36
  37
  37
  38
  38
  39
  13
  14
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  29
  30
  31
Funds from operations, $m
  54
  56
  57
  58
  60
  61
  63
  65
  67
  69
  65
  68
  70
  73
  76
  80
  83
  87
  91
  95
  99
  103
  108
  113
  119
  124
  130
  136
  143
  150
Change in working capital, $m
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
Cash from operations, $m
  53
  54
  55
  56
  58
  59
  61
  63
  65
  67
  62
  64
  67
  69
  72
  75
  79
  82
  86
  89
  93
  98
  102
  107
  112
  117
  123
  128
  134
  141
Maintenance CAPEX, $m
  -10
  -10
  -10
  -10
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -29
  -30
New CAPEX, $m
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
Cash from investing activities, $m
  -13
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -25
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -51
  -53
Free cash flow, $m
  41
  41
  41
  42
  42
  43
  44
  45
  46
  47
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  67
  70
  74
  77
  80
  84
  88
Issuance/(repayment) of debt, $m
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
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  
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  30
Total cash flow (excl. dividends), $m
  45
  46
  46
  48
  49
  50
  51
  53
  55
  56
  51
  53
  56
  58
  60
  63
  66
  69
  72
  75
  78
  82
  85
  89
  94
  98
  103
  108
  113
  118
Retained Cash Flow (-), $m
  -4
  -5
  -6
  -7
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
Prev. year cash balance distribution, $m
  8
  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
  49
  40
  41
  41
  41
  42
  43
  43
  44
  45
  40
  41
  42
  44
  45
  47
  49
  51
  53
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  84
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  47
  37
  35
  34
  32
  30
  29
  27
  26
  24
  19
  17
  16
  15
  13
  12
  11
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
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, Inc. (ELF)

Valuation Ratios
P/E Ratio 84.5
Price to Sales 1.8
Price to Book 3
Price to Tangible Book
Price to Cash Flow 211.2
Price to Free Cash Flow -60.4
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 $267 million for the last fiscal year's total revenue generated by e.l.f. Beauty, Inc.. The default revenue input number comes from 0001 income statement of e.l.f. Beauty, Inc.. 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 2% 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 4.3%, whose default value for ELF is calculated based on our internal credit rating of e.l.f. Beauty, Inc., 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, Inc..
    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 87.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 5.4% for e.l.f. Beauty, Inc..

Corporate tax rate of 27% is the nominal tax rate for e.l.f. Beauty, Inc.. 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 56.1%.

Life of production assets of 15.6 years is the average useful life of capital assets used in e.l.f. Beauty, Inc. 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 21.5%. 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 - $229.331 million for e.l.f. Beauty, Inc. - 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 48.820 million for e.l.f. Beauty, Inc. 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, Inc. at the current share price and the inputted number of shares is $0.5 billion.

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