Stock Analysis on Net
Stock Analysis on Net

e.l.f. Beauty, Inc. (NYSE:ELF)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

e.l.f. Beauty, Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 18.62%
01 FCFF0 72,695
1 FCFF1 77,990 = 72,695 × (1 + 7.28%) 65,745
2 FCFF2 85,634 = 77,990 × (1 + 9.80%) 60,855
3 FCFF3 96,184 = 85,634 × (1 + 12.32%) 57,621
4 FCFF4 110,455 = 96,184 × (1 + 14.84%) 55,781
5 FCFF5 129,626 = 110,455 × (1 + 17.36%) 55,185
5 Terminal value (TV5) 11,996,744 = 129,626 × (1 + 17.36%) ÷ (18.62% – 17.36%) 5,107,295
Intrinsic value of e.l.f. Beauty, Inc. capital 5,402,482
Less: Long-term debt, including current portion (fair value) 262,932
Intrinsic value of e.l.f. Beauty, Inc. common stock 5,139,550
 
Intrinsic value of e.l.f. Beauty, Inc. common stock (per share) $91.15
Current share price $114.65

Based on: 10-K (reporting date: 2024-03-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

e.l.f. Beauty, Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 6,464,910 0.96 19.15%
Long-term debt, including current portion (fair value) 262,932 0.04 5.81% = 6.83% × (1 – 14.92%)

Based on: 10-K (reporting date: 2024-03-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 56,388,228 × $114.65
= $6,464,910,340.20

   Long-term debt, including current portion (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (9.50% + 4.00% + 14.40% + 21.00% + 25.70%) ÷ 5
= 14.92%

WACC = 18.62%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

e.l.f. Beauty, Inc., PRAT model

Microsoft Excel
Average Mar 31, 2024 Mar 31, 2023 Mar 31, 2022 Mar 31, 2021 Mar 31, 2020
Selected Financial Data (US$ in thousands)
Interest expense 11,840 3,990 2,444 4,095 7,170
Net income 127,663 61,530 21,770 6,232 17,884
 
Effective income tax rate (EITR)1 9.50% 4.00% 14.40% 21.00% 25.70%
 
Interest expense, after tax2 10,715 3,830 2,092 3,235 5,327
Interest expense (after tax) and dividends 10,715 3,830 2,092 3,235 5,327
 
EBIT(1 – EITR)3 138,378 65,360 23,862 9,467 23,211
 
Current portion of long-term debt and finance lease obligations 100,307 5,575 5,786 16,281 12,568
Long-term debt and finance lease obligations 161,819 60,881 91,080 110,255 126,088
Stockholders’ equity 642,572 411,017 312,429 269,646 242,171
Total capital 904,698 477,473 409,295 396,182 380,827
Financial Ratios
Retention rate (RR)4 0.92 0.94 0.91 0.66 0.77
Return on invested capital (ROIC)5 15.30% 13.69% 5.83% 2.39% 6.09%
Averages
RR 0.84
ROIC 8.66%
 
FCFF growth rate (g)6 7.28%

Based on: 10-K (reporting date: 2024-03-31), 10-K (reporting date: 2023-03-31), 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31).

1 See details »

2024 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 11,840 × (1 – 9.50%)
= 10,715

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 127,663 + 10,715
= 138,378

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [138,378 – 10,715] ÷ 138,378
= 0.92

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 138,378 ÷ 904,698
= 15.30%

6 g = RR × ROIC
= 0.84 × 8.66%
= 7.28%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (6,727,842 × 18.62% – 72,695) ÷ (6,727,842 + 72,695)
= 17.36%

where:

Total capital, fair value0 = current fair value of e.l.f. Beauty, Inc. debt and equity (US$ in thousands)
FCFF0 = the last year e.l.f. Beauty, Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of e.l.f. Beauty, Inc. capital

FCFF growth rate (g) forecast

e.l.f. Beauty, Inc., H-model

Microsoft Excel
Year Value gt
1 g1 7.28%
2 g2 9.80%
3 g3 12.32%
4 g4 14.84%
5 and thereafter g5 17.36%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 7.28% + (17.36% – 7.28%) × (2 – 1) ÷ (5 – 1)
= 9.80%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 7.28% + (17.36% – 7.28%) × (3 – 1) ÷ (5 – 1)
= 12.32%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 7.28% + (17.36% – 7.28%) × (4 – 1) ÷ (5 – 1)
= 14.84%