Putting money into a promising growth stock and just letting it sit there can potentially lead to some fantastic returns for investors. However, having patience in a growing business is crucial. It can sometimes take a while for a stock’s value to reflect any impressive earnings and revenue growth the company may experience over the years and the potential it may possess.
One stock that looks impressive and downright unstoppable right now is e.l.f. Beauty (NYSE: ELF), which has been continuously generating solid growth numbers. With the stock still trading at a modest $7.3 billion market cap, it’s not hard to see how this popular cosmetics company could become much more valuable in the future.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
When a company grows its business for 23 consecutive quarters, “unstoppable” is the one word that definitely comes to mind. And according to e.l.f., its business hasn’t only been growing its sales for 23 straight quarters, but it also achieved market-share gains. The company’s competitively priced cosmetics are appealing options for consumers, now more than ever due to continued inflation and challenging economic conditions.
While the company’s growth rate has been slowing down in recent years, it’s still above its five-year average. And although 40% may be a slowdown for e.l.f.’s business, many companies would love to be achieving those types of numbers.
Unfortunately, the slowing growth rate has been enough of a reason to lead to a sell-off in e.l.f.’s share price in recent months. But the good news for patient investors is that there can be a lot more growth when looking at the long term, as e.l.f. is winning over young customers.
A reason I’m optimistic about the company’s future prospects isn’t just tied to its recent results, but also what consumers are saying about the business. According to Piper Sandler‘s most recent Taking Stock With Teens Survey, e.l.f. is far and away the top cosmetics brand with teens in the U.S. It was rated as the top brand for 35% of teens in the cosmetics category, with the next most popular brand having just a 10% share.
E.l.f. is winning over young consumers by offering an appealing mix of both quality and price. As those teens grow up with the brand, they have the potential to continue using e.l.f. products as they get older.
Shares of e.l.f. have fallen by more than 30% in the past six months as the company’s cooling growth rate is raising concerns for investors. But achieving more than 40% growth is hard for any business, especially in an economic environment where consumers have less purchasing power due to inflation.
