$13.20
$47.20
bear $13.20
base $31.20
bull $47.20
margin of safety $14.50
market price* $113.54
e.l.f. Beauty sells cosmetics and skincare under the e.l.f. Cosmetics, e.l.f. SKIN, rhode, Naturium and Well People brands. It does not make its own products; it sources finished goods from contract manufacturers, most of them in China, and sells them through mass and specialty retailers (Target, Walmart, Amazon, Sephora) and online. Gross margin is about 71%. In the fiscal year ended March 31, 2026, sales were $1,636.5 million, up 25%, but $293.5 million of that came from the rhode acquisition (closed August 5, 2025, price $897.5 million in cash, stock and a possible earnout). The existing brands added only $29.5 million, about 2%, and lower unit volume took away $10.5 million; higher prices and mix did the rest. How we measure earnings. We start from cash from operations, remove swings in working capital, subtract stock-based compensation (about $87 million last year, a real cost), and subtract only the capital spending needed to keep the business running (capex is small, about $22 million). On that basis owner earnings per share were about $0.58, $0.40, $0.80, $1.41, $2.64, $2.62 and $1.86 for fiscal years 2020 to 2026. We anchor on the median of the last three years (fiscal 2024 to 2026), about $2.62 per share, because the company changed in scale with the Naturium (October 2023) and rhode acquisitions; earlier years describe a much smaller business. Fiscal 2026 fell 29% from fiscal 2025, but that year's operating cash flow is after $47.1 million paid to rhode's sellers in connection with the acquisition (recorded as an operating outflow); excluding it, the year would be about $2.65 per share. Our base case therefore starts at the anchor rather than at the trailing figure. The first quarter of fiscal 2027 supports the level: sales were $479.4 million versus $353.7 million, net income $66.6 million versus $33.3 million, and operating cash flow $111.7 million versus $27.2 million, although that quarter includes rhode for the whole period while last year's did not. Amortization of acquired intangibles is added back in this method, so we give no credit for growth and let the earnings fade in the later years. Base case, about $31 per share. Owner earnings hold at about $2.62 per share for 15 years, then fade to zero over the following 15. We credit no growth. The reasons: organic growth was 2% last year, Target has fallen from 25% of sales to 18% in two years and Ulta from 16% to under 10%, and a $600 million term loan (maturing March 3, 2030) took interest cost from $13.8 million to $35.3 million. We also leave out the up-to-$200 million rhode earnout (payable only if sales thresholds are met, measured through September 2026, 2027 and 2028), any further acquisitions and any pricing gains not yet seen. What supports 15 years of earnings is the brand record: 70%-plus gross margins and a demonstrated ability to raise prices without losing sales through fiscal 2026 to date. Bear case, about $13 per share. Owner earnings fall to about $1.40 per share (roughly the fiscal 2023 level) and stay there for 10 years, fading to zero over the next 10. This assumes the trends already visible continue: retailer shelf space shifts (Target and Ulta), tariffs on China-made goods (the company paid about $58.5 million of tariffs that were later ruled unlawful, and a 10% global tariff replaced them in February 2026), volume declines rather than price gains, and the fixed interest cost on the term loan. Bull case, about $47 per share. Owner earnings start near $3.20 per share, reflecting rhode's four extra months in fiscal 2027 (it added $293.5 million in roughly eight months) and easing tariff costs, grow 3% a year for seven years on continued price and mix gains, hold for 20 years and fade to zero by year 30. It also adds about $0.90 per share for refunds of the $58.5 million of tariffs paid. The Supreme Court ruled in February 2026 that those tariffs were unauthorized and the refund claim process opened on April 20, 2026, but the government had not yet decided whether to appeal, so we include it only here. What we could not fully resolve: the size of rhode's earnings is not disclosed separately, so the annualization benefit in the bull case is an estimate from its sales. Cash of $289.7 million is not added to the value, because it is already reflected in the cash flows we discount. What would make this wrong: a further loss of retail shelf space or price resistance, a move to higher tariffs, or rhode sales fading after its launch surge would put results in the bear case; a sustained return to double-digit organic growth would make even our bull case too low.