Cosmetics company e.l.f. Beauty (NYSE: ELF) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 14.2% year on year to $343.9 million. The company’s full-year revenue guidance of $1.56 billion at the midpoint came in 5.5% below analysts’ estimates. Its non-GAAP profit of $0.68 per share was 19.9% above analysts’ consensus estimates.
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e.l.f. Beauty (ELF) Q3 CY2025 Highlights:
- Revenue: $343.9 million vs analyst estimates of $367.3 million (14.2% year-on-year growth, 6.4% miss)
- Adjusted EPS: $0.68 vs analyst estimates of $0.57 (19.9% beat)
- Adjusted EBITDA: $66.24 million vs analyst estimates of $60.15 million (19.3% margin, 10.1% beat)
- Adjusted EPS guidance for the full year is $2.83 at the midpoint, missing analyst estimates by 19.9%
- EBITDA guidance for the full year is $304 million at the midpoint, below analyst estimates of $346.1 million
- Operating Margin: 2.2%, down from 9.3% in the same quarter last year
- Free Cash Flow Margin: 4.8%, up from 3.2% in the same quarter last year
- Market Capitalization: $7.02 billion
Company Overview
Short for "eyes, lips, face", e.l.f. Beauty (NYSE: ELF) is a developer of high-quality beauty products at accessible price points.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $1.39 billion in revenue over the past 12 months, e.l.f. Beauty is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers. On the bright side, it can grow faster because it has a longer list of untapped store chains to sell into.
As you can see below, e.l.f. Beauty grew its sales at an incredible 45.7% compounded annual growth rate over the last three years. This is a great starting point for our analysis because it shows e.l.f. Beauty’s demand was higher than many consumer staples companies.
This quarter, e.l.f. Beauty’s revenue grew by 14.2% year on year to $343.9 million but fell short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 33.5% over the next 12 months, a deceleration versus the last three years. Still, this projection is noteworthy and implies the market is forecasting success for its products.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
e.l.f. Beauty has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.3% over the last two years, slightly better than the broader consumer staples sector.
Taking a step back, we can see that e.l.f. Beauty’s margin expanded by 8.4 percentage points over the last year. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.
e.l.f. Beauty’s free cash flow clocked in at $16.57 million in Q3, equivalent to a 4.8% margin. This result was good as its margin was 1.6 percentage points higher than in the same quarter last year, building on its favorable historical trend.
Key Takeaways from e.l.f. Beauty’s Q3 Results
We were impressed by how significantly e.l.f. Beauty blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 21.5% to $92.50 immediately following the results.
The latest quarter from e.l.f. Beauty’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
