Shares of e.l.f. Beauty (ELF +1.13%) slipped 39.4% in 2025, according to data from S&P Global Market Intelligence. The beauty company focused on mass market products at a lower price point made an acquisition this year, but is seeing slowing growth at a premium earnings multiple, which is a recipe for bad stock performance.
The stock is now down 60% from all-time highs. Here's why e.l.f. Beauty stock was falling again in 2025.
NYSE: ELF
Key Data Points
Slowing revenue growth in beauty
For years, e.l.f. Beauty has been a market share taker in beauty categories such as lip gloss, makeup, and eyeliner, leading to impressive revenue growth. In 2025, that growth began to stagnate.
The company made an acquisition of upstart Rhode, which will contribute $200 million in revenue for the 2026 fiscal year, leading to 18%-20% overall growth for the company. However, if you strip out inorganic sales from acquisitions, revenue is expected to only grow 3%-4% this fiscal year, which is a significant slowdown from recent quarters. This is why e.l.f. Beauty stock has begun to slip.
At the same time, e.l.f. Beauty's gross margin has slipped from 68% to 66%, indicating it has to discount on inventory in order to drive sales, another negative sign for the business. With the stock beginning the year trading at a premium price-to-earnings ratio (P/E) of 75, it is no wonder that shares suffered last year. Slowing revenue growth on a premium P/E ratio is a recipe for disaster.
Image source: Getty Images.
Buy the dip on e.l.f. Beauty stock?
Even though revenue grew 14% last quarter -- some inorganic -- e.l.f. Beauty's operating income declined to a measly $7.7 million as it spent more money on marketing. This is another bad sign for the business.
Declining earnings on slowing revenue growth have meant that e.l.f. Beauty's P/E ratio is still trading at a premium of 62, even after this huge stock price drop. This is a worrisome valuation because of the company's slowing organic revenue growth.
What's more, e.l.f. Beauty has taken on $600 million in debt to finance its acquisition of Rhode for $1 billion. With just over $100 million in free cash flow, it will take e.l.f. Beauty a long time to pay down this debt.
Add everything together, and e.l.f. Beauty stock does not look like a strong buy-the-dip candidate today.
