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

The financial data reflects several key trends in profitability, capital investment, and economic value creation over the five-year period.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited notable volatility. It started at a moderate level, sharply declined in the second year, then substantially increased in the following years. By the most recent year, NOPAT had more than doubled compared to the initial year, indicating significant improvement in operating profitability after taxes.

Cost of Capital

The cost of capital showed a gradual upward trend, rising from 17.64% to around 20% over the period. This increase may reflect changes in market conditions or risk assessments, leading to higher required returns on invested capital.

Invested Capital

Invested capital increased steadily, with an especially sharp rise in the latest year, more than doubling from the previous year. This suggests aggressive capital investment or acquisitions, indicating the company has significantly expanded its asset base or operational scale.

Economic Profit

Economic profit remained negative throughout the period, implying that the company consistently did not generate returns exceeding its cost of capital. Although there was some improvement in economic profit following the steepest negative value in the second year, it deteriorated again in the most recent year despite improvements in NOPAT and higher invested capital. This suggests challenges in achieving value creation relative to the increased capital base and rising cost of capital.

Overall, the data indicates a scenario of growing operating profits and a significant increase in invested capital, accompanied by rising cost of capital. However, the persistent negative economic profit implies that the returns generated have not yet surpassed the financial cost of capital, highlighting a continuing need for efficiency improvements or strategic adjustments to enhance shareholder value.

The analysis of the financial performance over the reported periods reveals significant fluctuations and an overall strong upward trend in profitability metrics.

Net Income

The net income experienced a notable decline from 17,884 thousand USD in 2020 to 6,232 thousand USD in 2021, indicating a decrease in profitability. However, from 2021 onwards, the net income showed a robust recovery and growth, rising substantially to 21,770 thousand USD in 2022 and accelerating sharply to 61,530 thousand USD in 2023. This growth continued into 2024, with net income reaching 127,663 thousand USD, reflecting a significant improvement in the company's earnings over the five-year span.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a somewhat similar pattern, starting at 26,428 thousand USD in 2020 and dumping dramatically to 618 thousand USD in 2021, which suggests operational challenges or increased expenses during that year. Subsequently, NOPAT rebounded to 20,327 thousand USD in 2022 and increased strongly to 57,046 thousand USD in 2023. The upward trajectory persisted, with NOPAT climbing to 132,182 thousand USD in 2024, indicating enhanced operational efficiency and profitability after accounting for taxes.

Overall, the data indicates that despite a difficult year in 2021, both net income and NOPAT improved significantly in the following years, culminating in record-high results in 2024. This suggests effective management strategies, operational improvements, or market conditions that positively impacted profitability and operational performance.

Provision (benefit) for income taxes

The provision for income taxes displayed notable volatility over the analyzed periods. In the year ending March 31, 2020, there was a positive provision amounting to 6,185 thousand US dollars, which turned into a tax benefit (negative provision) of 2,542 thousand US dollars in the subsequent year. The provision reverted to a positive figure of 3,661 thousand US dollars for the year ending March 31, 2022, then increased slightly to 2,544 thousand US dollars in 2023, followed by a substantial rise to 13,327 thousand US dollars in 2024. This substantial increase in 2024 suggests a significant rise in taxable income or changes in tax strategy or rates affecting the provision.

Cash operating taxes

Cash operating taxes exhibited a consistent upward trajectory throughout the analyzed timeline. Starting at 5,178 thousand US dollars in 2020, this figure increased year-over-year, reaching 7,044 thousand US dollars in 2021, 7,989 thousand US dollars in 2022, then 9,455 thousand US dollars in 2023. The most pronounced increase occurred between 2023 and 2024, when cash operating taxes nearly doubled to 18,383 thousand US dollars. This trend indicates increasing cash outflows related to tax obligations, potentially reflecting higher taxable profits, changes in tax regulations, or improved collection and payment practices.

Total Reported Debt & Leases

The total reported debt and leases showed a declining trend from March 31, 2020, through March 31, 2023, decreasing from $152.978 million to $82.167 million. This represents a substantial reduction in debt and lease obligations over this period. However, as of March 31, 2024, there was a significant increase to $290.601 million, indicating a sharp rise in leverage or financing commitments in the most recent year.

Stockholders' Equity

Stockholders' equity demonstrated consistent growth over the five-year period. Starting at $242.171 million in March 2020, it increased steadily each year, reaching $642.572 million by March 2024. This reflects a strong accumulation of equity, potentially through retained earnings and/or capital infusions, suggesting an improvement in the company's net assets and financial strength.

Invested Capital

Invested capital rose gradually from $418.026 million in March 2020 to $496.463 million in March 2023. Notably, there was a considerable jump to $936.268 million as of March 2024. This substantial increase parallels the surge in total debt and leases, possibly indicating increased investments or assets financed by the higher debt levels. The overall trend suggests expansion or significant investment activities in the latest fiscal year.

The financial data reflects several key trends over the five-year period ending March 31, 2024.

Economic Profit

The economic profit demonstrates persistent negativity throughout the period, indicating the company has consistently failed to generate returns above its cost of capital. The loss deepened substantially from -47,308 thousand US dollars in 2020 to a peak negative value of -80,778 thousand in 2021. Subsequently, economic profit improved towards 2023, showing a decrease in losses to -43,176 thousand, but deteriorated again to -55,116 thousand in 2024. This pattern suggests fluctuations in profitability with no significant achievement of positive economic profit.

Invested Capital

There is a notable upward trend in invested capital, which increased steadily from 418,026 thousand US dollars in 2020 to 936,268 thousand in 2024. The growth was moderate between 2020 and 2023, rising by approximately 78,437 thousand, but experienced a marked acceleration between 2023 and 2024, almost doubling the prior year’s amount. This significant increase in invested capital may indicate expansion or increased investment in assets, however, such growth has not yet translated into positive economic profit.

Economic Spread Ratio

The economic spread ratio remained negative during the entire period, showing the company’s returns fell short of its capital costs. The ratio worsened from -11.32% in 2020 to its lowest point of -18.61% in 2021. In the following years, this deficit gradually narrowed, improving to -5.89% by 2024. Despite this improvement, the ratio remains below zero, emphasizing ongoing challenges in generating sufficient returns on invested capital.

In summary, the data reveals a company experiencing increasing investment levels and a gradual improvement in economic efficiency over the latter years, but still confronted with persistent underperformance from an economic profit and spread perspective. These patterns suggest a focus on managing capital efficiency and improving profitability ratios may be necessary to achieve sustainable value creation in future periods.

Net Sales

Net sales exhibited a consistent upward trajectory over the five-year period. Beginning at $282.9 million in 2020, sales increased steadily each year, reaching $1.02 billion by 2024. Notably, the growth accelerated significantly between 2022 and 2024, with an especially sharp rise in the final year, indicating strong revenue expansion and possibly increased market demand or successful business initiatives.

Economic Profit

Economic profit remained negative throughout the entire period, indicating that the company did not generate returns above its cost of capital. The largest loss was observed in 2021, with a decline to -$80.8 million. Subsequently, the economic loss trended downward to -$55.1 million by 2024, showing some improvement but still reflecting unprofitability from an economic profit perspective. The trend suggests that despite increasing sales, the company struggled to convert revenue growth into economic profit during these years.

Economic Profit Margin

The economic profit margin mirrored the economic profit trend, starting at a negative 16.73% in 2020 and worsening to -25.39% in 2021. After this low point, the margin improved steadily over the following years, reaching -5.38% by 2024. This indicates gradual improvement in profitability relative to sales; however, the negative percentages confirm that economic profit remained below zero. The narrowing margin gap suggests better cost control or more efficient capital usage over time.