Tech stocks are the undisputed leaders of growth stocks, but it would be a shame for investors to miss other growth stocks out there because they’re not looking in all the right places. If you wear makeup, there’s an amazing stock that could be literally under your nose: e.l.f. Beauty(NYSE: ELF). If you don’t wear makeup, tear yourself away from computer chips for a moment to take a look.
Wall Street doesn’t always have a consensus about a stock, but it does here. 13 out of 17 analysts call it a buy, and the other four call it a hold. None of them expect the price to go down. The lowest price target for e.l.f. stock is 15% higher than today, and the highest is 120%.
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A great consumer goods stock could have an edge over a great tech stock — just ask Warren Buffett. e.l.f. is building a strong brand and capturing market share along the way. Let’s see why this stock is up 240% over the past three years, and why it can supercharge your portfolio.
e.l.f. is carving out a niche as a mass brand for the modern beauty enthusiast. It leverages social media to promote its low-priced beauty products that include cosmetics, skincare, and haircare, and shoppers are drawn to its differentiated branding and innovative marketing that touts its eco-friendly formulas.
Sales increased 50% year over year in the fiscal first quarter of 2025, ended June 30, 2024, an incredible showing under pressured circumstances. However, it was still a deceleration from previous quarters. For a while, e.l.f. benefited from customers switching down to mass beauty products from expensive, luxury lines. That appears to be waning, and management is guiding for full-year growth of about 26%. That implies an even greater slowdown over the next three quarters.
It also reported sluggish profits, with a decrease in net income year over year. Management is investing in its digital marketing campaigns, which are the backbone of its differentiated social media approach and underpin its strategy of relationship building. It’s also still rolling out its recently acquired skincare brand Naturium, which will affect short-term profitability.
These are short-term factors. Savvy investors will recognize that the long-term outlook for e.l.f. is extremely compelling. Despite the challenges right now, e.l.f. is gaining market share in all of its segments, with a 2.6 percentage point increase in color cosmetics market share in Q1 while many industry leaders were losing market share.
It’s already carved out a niche in color cosmetics, where it continues to gain traction, and the opportunity is even wider in skincare. It gained 0.6 percentage points in market share in Q1 and moved from the No. 13 spot last year to the No. 9 spot this year, but it still has only 2% of the market. Naturium contributed 16 percentage points of e.l.f.’s sales increase in the quarter. It’s also harnessing opportunities in international, where sales increased 91% year over year. It recently launched or expanded deals in Mexico, Germany, Italy, and several other countries.
e.l.f. stock is down 24% this year. However, the silver lining for new investors is that e.l.f. stock’s valuation has declined from astronomical levels. It currently trades at a forward, one-year price-to-earnings (P/E) ratio of 24, which is quite reasonable for a high-growth stock. It does deserve some kind of premium for its opportunities, but it’s not surprising that the stock has come down given current pressures.
e.l.f. might continue to report pressured profits, but management is guiding for a full-year increase. It raised guidance in the first quarter, and moderating inflation could help it surpass expectations.
Longer-term, e.l.f. is well-positioned to keep growing and capturing more market share, launching new products and moving up in the cosmetics rankings. If you’re looking for a growth stock with massive long-term potential, e.l.f. is an excellent choice.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends e.l.f. Beauty. The Motley Fool has a disclosure policy.
