Last year was a brutal one for cosmetics giant e.l.f. Beauty (ELF 7.77%). Its shares plummeted nearly 40% as tariffs and concerns about the economy weighed down its valuation. So far, 2026 has been much better for the company. As of Jan. 26, the stock is up an incredible 17% to start the year, while the S&P 500 has risen by less than 2%.
The uncertainty around tariffs hasn't gone away, but investors appear to be taking a second look at e.l.f.'s beaten-down valuation, and may be seeing some intriguing potential. Is the stock destined to go even higher in the months ahead, or has it already gotten too hot to buy right now?
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The company showed resilient growth last quarter
One of the reasons investors may be encouraged by e.l.f.'s stock is the company's versatility. While tariffs did result in the company raising prices on many products, its recent performance has by no means been catastrophic.
When e.l.f. last reported earnings in November, the company's sales rose by 14% to $343.9 million for the period ending Sept. 30, 2025. The company's gross margin worsened by 165 basis points, primarily due to tariffs, but it remained fairly strong at 69%. But with the company's selling, general, and administrative expenses rising by 24%, e.l.f.'s overall profit for the period ended up declining by a staggering 84%, to $3 billion (versus $19 billion in the prior-year period). The results did, however, include acquisition and other one-time expenses that skewed its overall numbers; its adjusted earnings were down by a more modest rate of less than 10%.
NYSE: ELF
Key Data Points
Why the stock still looks like a good buy
If the courts rule that tariffs are illegal and are no longer in effect, e.l.f.'s stock could be among the biggest winners on such developments. But even if that doesn't end up happening, the stock may still be a great buy for long-term investors. With e.l.f. being a popular cosmetics brand with young people and the business still looking to be in good shape, I'm optimistic it can continue rallying this year and beyond.
The stock currently trades at 27 times its estimated future earnings (based on analyst expectations), which may seem a bit high, but that could improve if economic conditions become more favorable. Its low-priced items have demonstrated strong demand and resiliency even amid economic uncertainty, which are great signs for investors that the business may not be as vulnerable to tariffs as it may have first appeared to be.
While e.l.f.'s stock has proven to be volatile over the past year, this can be an excellent investment to hang on to for the long haul.
