What happened
Shares of e.l.f Beauty (ELF 2.04%) were up 16% as of 10 a.m. ET on Wednesday after the cosmetics brand delivered better-than-expected sales growth for the fiscal first quarter of 2024.
Sales grew an impressive 76% year over year, but the company still has a lot of opportunity to expand overseas.
So what
The stock has been rocketing higher over the last year. The momentum started with the reopening of the economy after the pandemic, and management has capitalized on it with smart marketing tactics using social media influencers and other celebrity collaborations.
The brand increased market share in the quarter by 260 basis points. E.l.f. was the only cosmetics brand to gain market share over the last 18 quarters. Management believes it is still in the early innings of growth.
The company posted international sales growth of 79%, driven by demand in the U.K. and Canada. Management is looking to expand in more international markets.
Compared to the U.S., e.l.f. has relatively low brand awareness in global markets, ranking as the No. 6 brand in the U.K. and Canada, but the company could see explosive growth in these markets as it continues to execute its value-based selling strategy.
Now what
E.l.f. is focused on offering the best beauty accessories at a value price, and that is certainly paying off in a high inflation environment. Management raised full-year sales expectations, but new investors should be cautious as the stock's valuation inches higher.
The forward price-to-earnings ratio has soared from a bargain of 20 times expected earnings last year to a sky-high multiple of 74. This hot cosmetic stock is almost priced for perfection, so the company will have to continue delivering high growth to satisfy investor expectations.
