What happened

Shares of e.l.f. Beauty Inc (NYSE:ELF) were up nearly 15% as of noon E.T. Thursday after the beauty and makeup company reported fourth-quarter and full-year 2016 earnings that were better than expectations.

So what

e.l.f. Beauty Inc. reported sales of $76.4 million for the quarter, up 17% year over year. Sales for the full year came in at $230 million, up 20% over 2015. The company beat analyst estimates with earnings of $6.6 million, or $0.13 per share for the quarter, compared with a loss of nearly $40 million in Q4 2015. For the full year, the company still posted a net loss of $497.5 million, but adjusted for one-time costs like initial public offering costs (since the company went public in 2016). Earnings were $0.36 per share. CEO Tarang Amin said in the earnings release:

"This strong performance reflects progress executing our mission to make luxurious beauty accessible to all women. Our first to mass innovation and authentic brand appeals to some of the best consumers in cosmetics – young, diverse, make-up enthusiasts."

A few e.l.f. Beauty products with the "elf" logo.

Image source: e.l.f. Beauty Inc.

Now what

Management believes that it has plenty of opportunity for growing market share in 2017 and beyond, saying in the earnings call that e.l.f. Beauty's share of the the U.S. mass color cosmetics market increased from 2.7% at the end of 2015 to 3.4% at the end of 2016. The company plans to use its "Beauty Scape influencer program" that uses social media and on-site activations to build a larger following, as well as engaging what the company calls its over 190,000 "Beauty Squad members."

Part of the reason e.l.f. Beauty was able to beat earning expectations for the recent quarter was an impressive rise in gross margin from 52% to 58%, which if maintained should help grow earnings nicely in 2017. For full year 2017, the company has guided for sales of as much as $295 million, which would be a 28% rise year over year, and adjusted earnings per share that could grow another 19% over 2016.

Seth McNew has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.