1 Growth Stock Down 30% to Buy Right Now

e.l.f. Beauty's stock has retreated approximately 30% from its June high following its fiscal Q1 report, driven by an updated fiscal 2025 outlook projecting decelerated revenue growth of 25-27% and adjusted EBITDA growth of 27-28%. Despite this slowdown from historical rates, the company is actively pursuing significant international expansion, which saw 91% year-over-year growth in Q1, and diversifying its portfolio through the Naturium acquisition. Analysts anticipate continued robust growth with a 21% revenue CAGR and 25% adjusted EBITDA CAGR through fiscal 2027, suggesting the current valuation of 6x sales and 28x adjusted EBITDA may represent a compelling buying opportunity for long-term investors.

Analysis

e.l.f. Beauty (ELF) stock has experienced a significant 30% retreat from its June record high of $218, largely following its fiscal 2025 first-quarter report on August 8th. Despite an earnings beat, the company's updated fiscal 2025 outlook, projecting revenue growth of 25-27% and adjusted EBITDA growth of 27-28%, signaled a notable deceleration from its historical compound annual growth rates (CAGRs) of 31% for revenue and 30% for adjusted EBITDA between fiscal 2019 and 2024.

However, e.l.f. is actively pursuing strategic initiatives to sustain growth. Its international segment demonstrated robust expansion, with revenue soaring 91% year-over-year in Q1, despite currently comprising only 16% of the top line, indicating substantial untapped potential compared to global peers averaging over 70% international sales. The acquisition of Naturium further diversifies its product portfolio into higher-priced skincare and new demographics, including millennials and men, suggesting a pivot towards inorganic growth as organic growth moderates.

Analysts anticipate e.l.f. will maintain strong performance, forecasting a 21% revenue CAGR and a 25% adjusted EBITDA CAGR from fiscal 2024 to 2027. With an enterprise value of $8.6 billion, the company trades at 6 times this fiscal year's sales and 28 times adjusted EBITDA, which appears reasonable relative to these projected growth rates. The recent approval of a $500 million stock buyback plan further underscores management's confidence and commitment to shareholder value.

Key Decisions for Investors

• Consider the recent 30% stock pullback as a potential entry point for long-term investors, given the company's strategic growth initiatives and analyst-projected double-digit CAGRs for revenue and EBITDA.
• Monitor the execution and impact of e.l.f.'s international expansion and the Naturium acquisition, as these are critical for diversifying revenue streams and sustaining growth beyond the maturing U.S. market.
• Evaluate the company's current valuation of 6x sales and 28x adjusted EBITDA against its robust growth outlook and the recently approved $500 million stock buyback program.