Filing Flows › Companies › e.l.f. Beauty › Analysis traps
e.l.f. Beauty (ELF): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q2 FY27, to Sep 30, 2026, filed Nov 5, 2026; rules v1.1
e.l.f. Beauty (ELF): 2 rules of 10 triggered on the filings to Sep 30, 2026: FCF growth = the business improved; stock compensation added back = no economic cost. 1 to review; 1 with insufficient data; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
FCF growth = the business improved Triggered · severity high · confidence medium
Free cash flow rose $75M (+65%), from $115M to $190M, but working capital released $103M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital fell by $24M.
Innocent reading: An expansion programme finished, so capex fell back to maintenance levels for good.
Stock compensation added back = no economic cost Triggered · severity medium · confidence high
Stock compensation was $87M, 5.3% of revenue, in FY26; buybacks were $50M (0.6× the SBC) and the diluted share count still rose 1.7%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
Innocent reading: A young company paying in equity while it scales; intensity falls as revenue grows.
A precise DCF value = the true value To review · confidence high
The DCF's point value is 42.61 a share (price 116.14); 57% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 27.74 to 57.49; across every method the research ran the range is -16 to 250. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Triggered severity high · confidence medium
Free cash flow rose $75M (+65%), from $115M to $190M, but working capital released $103M more cash than the year before: more than the whole increase came from sources that need not repeat. Operating cash flow before working capital fell by $24M.
The figures and how they are read
| Fiscal year before | FY25 |
| Fiscal year | FY26 |
| Operating cash flow, year before | $134M |
| Operating cash flow | $213M |
| Capex, year before | $19M |
| Capex | $22M |
| Free cash flow, year before | $115M |
| Free cash flow | $190M |
| Change in FCF | $75M |
| Change in capex | $4M |
| Working capital: change in its cash contribution | $103M |
| Of which: capex cut | 0.00 |
| Of which: working capital released | $103M |
| Share of the increase that need not repeat | +137.4% |
| Operating cash flow before working capital: change | -24017000.00 |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY26 (cash flow statement, fiscal year) · FY25 (cash flow statement, fiscal year before)
What would explain it innocently
- An expansion programme finished, so capex fell back to maintenance levels for good
- Suppliers agreed longer payment terms in a contract
- Inventory was brought down after a glut and will stay down
What to look for in the filing
- Maintenance capex (what it costs to keep the assets working)
- Supplier payment terms and any supply-chain financing
- Management's capex guidance for next year
What would show the trap does not apply
- Next year's FCF holds or rises with capex back at its earlier level and working capital no longer releasing cash
- The 10-K's capex guidance and the segment capex show the cut is a completed programme, not deferral
- The working-capital release matches a disclosed change in terms or a divestiture, not stretched payables or a collection push
Look again: next filing.
A07 Stock compensation added back = no economic cost Triggered severity medium · confidence high
Stock compensation was $87M, 5.3% of revenue, in FY26; buybacks were $50M (0.6× the SBC) and the diluted share count still rose 1.7%. 'Adjusted' figures that add SBC back treat pay in shares as free; the cost is borne by every shareholder as dilution, or by the cash spent to buy the shares back.
The figures and how they are read
| Fiscal year | FY26 |
| Stock compensation | $87M |
| Revenue | $1.6B |
| SBC / revenue | +5.3% |
| Buybacks | $50M |
| Buybacks / SBC | 0.6 |
| Diluted shares, year before | 58.3M shares |
| Diluted shares | 59.4M shares |
| Diluted shares: change | +1.7% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY26 (stock compensation, buybacks and the diluted share count, fiscal year)
What would explain it innocently
- A young company paying in equity while it scales; intensity falls as revenue grows
- Buybacks at prices below intrinsic value make up for the dilution over time
- A one-off grant (an acquisition, a founder award) rather than a steady level
What to look for in the filing
- The share count after the latest buybacks (the next 10-Q's cover)
- The price paid for the buybacks against the shares' value
- Unvested awards outstanding
What would show the trap does not apply
- The diluted share count falls over two years with buybacks at least equal to the stock compensation
- Stock compensation falls as a share of revenue in each of the next two years
Look again: next filing.
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 59% against revenue 51% in Q2 FY27; DSO 37 against a median of 39: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q2 FY27 |
| Revenue, year over year | +51.4% |
| Receivables, year over year | +59.2% |
| Quarter before | Q1 FY27 |
| Revenue y/y, quarter before | +35.5% |
| Receivables y/y, quarter before | +0.7% |
| Days sales outstanding | 37.2 |
| DSO, median of eight quarters | 38.5 |
| Receivables | $246M |
| Revenue | $521M |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q2 FY27 (receivables and revenue) · Q2 FY26 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Insufficient data
no reconciliation table read from the releases yet and fewer than three quarters with both an adjusted and a GAAP EPS
C02 Low net debt = no refinancing risk Not triggered confidence medium
$30M comes due within a year, 20.9× covered by cash and investments of $351M plus $276M of free cash flow.
The figures and how they are read
| Cash and investments | $351M |
| Debt | $827M |
| Net debt | $476M |
| Due within a year | $30M |
| Read from | the debt maturity table |
| Free cash flow, twelve months | $276M |
| Cash plus free cash flow | $626M |
| Coverage of what is due | 20.9 |
| Due in the second year | $30M |
| Balance sheet date | 2026-09-30 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: FY26 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 900% and net income rose 902% in Q2 FY27; the share count rose 0.8%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q2 FY27 |
| Quarter before | Q2 FY26 |
| EPS, year before | $0.05 |
| EPS | $0.50 |
| Net income, year before | $3M |
| Net income | $30M |
| Diluted shares, year before | 59.6M shares |
| Diluted shares | 60.1M shares |
| EPS growth | +900.0% |
| Net income growth | +902.3% |
| Diluted shares: change | +0.8% |
| eps from profit | $0.45 |
| eps from share count | $0.00 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q2 FY27 (net income, diluted shares, EPS) · Q2 FY26 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued Not triggered confidence medium
Net income of $87M is not at a cyclical high against the last eight years (median $26M, best $128M): the P/E of 80.5× is on a normal year.
The figures and how they are read
| market value | $7.0B |
| net income ttm | $87M |
| pe ttm | 80.50 |
| net income median fy | $26M |
| pe mid cycle | 265.20 |
| net income peak fy | $128M |
| years | FY19 / 16.0; FY20 / 18.0; FY21 / 6.0; FY22 / 22.0; FY23 / 62.0; FY24 / 128.0; FY25 / 112.0; FY26 / 26.0 |
| down years in window | 3 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q2 FY27 (net income, trailing twelve months)
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 42.61 a share (price 116.14); 57% of it is the terminal value, a number about years no one has seen. Moving operating margin by ±3 pts alone takes it from 27.74 to 57.49; across every method the research ran the range is -16 to 250. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 42.61 |
| price | 116.14 |
| terminal value share | +57.2% |
| swing by input | Operating margin / ±3 pts / 27.74 / 57.49; Revenue growth (each year) / ±5 pts / 35.42 / 50.9; WACC / ±1 pt / 37.92 / 48.45; Working capital per $ of growth / ±10 pts / 37.83 / 47.4 |
| range all methods | -15.9; 249.6 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → e.l.f. Beauty: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.