Is ELF Stock a Buy as Growth Accelerates but Valuation Stays Rich?

ELF's Portfolio Growth Strengthens the Bull Case

First-quarter fiscal 2027 net sales increased 36% to $479.4 million, extending ELF’s run to 30 consecutive quarters of sales growth. Non-e.l.f. brands now represent more than 30% of the business, up from less than 1% three years ago.

That diversification broadens exposure beyond core cosmetics. Ulta Beauty, Inc. ULTA also reported 11.1% net sales growth and 5.3% comparable sales growth in its fiscal first quarter, showing continued demand across a major beauty retail channel.

Rhode and Skincare Expand ELF's Opportunity

Rhode contributed about $160 million of first-quarter sales and exceeded management’s expectations. The brand remains in less than 20% of Sephora’s global store base, while a planned September launch across 19 European countries expands distribution.

Skincare has grown from about 10% of ELF’s sales three years ago to nearly 25%. e.l.f. SKIN is the number 11 U.S. mass skincare brand, while Naturium is the fastest-growing skincare brand among the top 50.

ELF's Earnings Outlook Moves Higher

Management raised fiscal 2027 net sales guidance to $1.938-$1.968 billion, implying 18%-20% growth versus 12%-14% previously. Adjusted earnings guidance increased to $3.50-$3.55 per share from $3.27-$3.32.

The stronger outlook follows adjusted first-quarter earnings of $1.75 per share, above the Zacks Consensus Estimate of 71 cents. Management also raised expected organic net sales growth for fiscal 2027 to 6%-7% from 4%-5%.

ELF's Premium Valuation Demands Execution

ELF trades at 26.8X forward 12-month earnings, above 20.7X for the Zacks cosmetics sub-industry and 20.7X for the S&P 500. That premium leaves less room for disappointment if growth or margins fall short.

The Estee Lauder Companies Inc. EL offers industry context. Its fiscal third-quarter 2026 organic net sales increased 2%, while the company raised its fiscal 2026 organic sales outlook to about 3%. ELF’s faster growth supports a premium, but sustained execution remains essential.

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Core ELF Demand and Spending Remain Risks

Organic net sales excluding Rhode declined at a high-single-digit rate in the first quarter, while companywide unit volumes reduced growth by about three percentage points. The flagship brand remains the main test of whether consolidated growth can become less dependent on acquired brands.

Adjusted selling, general and administrative expenses rose to 54% of net sales from 50% a year earlier. Marketing and digital spending is expected to exceed 25% of sales during the balance of the year, which could pressure profitability if growth disappoints.

ELF's Signals Favor Growth Over Value

The bottom line is that ELF’s outlook is improving, but the stock is not a straightforward value call. Raised guidance supports the growth case, while the premium multiple and core-brand softness argue for attention to execution and entry price.

ELF currently carries a Zacks Rank #1 (Strong Buy) and a Growth Score of A. The Zacks Rank reflects earnings estimate revisions, while the Growth Score evaluates growth characteristics and financial strength, a favorable combination for growth-focused investors. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Value Score of F and Momentum Score of D are less supportive, while the VGM Score of C indicates a mixed profile across value, growth and momentum. Investors should weigh those weaker readings against ELF’s favorable growth signal rather than treating the rank alone as a complete investment case.

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This article originally published on Zacks Investment Research (zacks.com).

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