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

The analyzed financial data reveals several key trends in the company's profitability and capital structure over the five-year period ending March 31, 2024.

Return on Assets (ROA)

The ROA experienced a decline from 3.95% in 2020 to 1.28% in 2021, indicating a reduced efficiency in generating profit from assets during that year. However, this metric improved significantly thereafter, rising to 4.4% in 2022, then sharply increasing to 10.33% in 2023, and further to 11.31% by 2024. The upward trend from 2021 onwards suggests enhanced asset utilization and profitability.

Financial Leverage

Financial leverage, expressed as a ratio, trended downward from 1.87 in 2020 to its lowest point of 1.45 in 2023, suggesting a gradual reduction in reliance on debt financing relative to equity. However, there was an uptick to 1.76 in 2024, indicating a modest increase in gearing which could imply either strategic leveraging or a response to capital needs.

Return on Equity (ROE)

The ROE mirrored the ROA pattern to some extent, starting at 7.38% in 2020 before dropping sharply to 2.31% in 2021. Subsequently, it rebounded to 6.97% in 2022, followed by a robust increase to 14.97% in 2023 and reaching 19.87% in 2024. The strong improvement in ROE, coupled with the relatively stable leverage ratio, indicates improved efficiency in generating shareholder returns while maintaining controlled financial risk.

Overall, the data reflects a period of initial decline in profitability metrics in 2021, followed by marked recovery and growth in subsequent years. The financial leverage decrease until 2023, with a slight rise in 2024, suggests a cautious approach to debt management that complements the improvements in profitability and equity returns.

The analysis of the financial metrics indicates several notable trends over the five-year period from 2020 to 2024.

Net Profit Margin

The net profit margin starts at 6.32% in 2020, experiences a significant decline to 1.96% in 2021, then recovers steadily over the following years, achieving 12.47% in 2024. This pattern suggests initial challenges impacting profitability in 2021, followed by strong improvements in operational efficiency or cost management leading to enhanced profitability.

Asset Turnover

The asset turnover ratio exhibits a generally upward trend from 0.62 in 2020 to a peak of 0.97 in 2023, before slight decline to 0.91 in 2024. This indicates increasing efficiency in using assets to generate sales over the majority of the period, with a minor reduction in the most recent year.

Financial Leverage

Financial leverage decreases from 1.87 in 2020 to a low of 1.45 in 2023, indicating a reduction in the use of debt or borrowed funds relative to equity during this period. However, in 2024, leverage increases again to 1.76, suggesting a renewed reliance on financial leverage.

Return on Equity (ROE)

ROE closely mirrors the trends in net profit margin, starting at 7.38% in 2020, dropping significantly to 2.31% in 2021, then improving consistently to reach 19.87% by 2024. The sharp increase in the later years reflects enhanced profitability combined with effective asset utilization and financial strategy adjustments.

Overall, the data reveals a temporary dip in profitability in 2021, followed by sustained improvement through 2024, supported by better asset efficiency and a dynamic approach to financial leverage. The company's ability to boost ROE significantly by 2024 highlights successful management of both operational performance and capital structure after the initial downturn.

Tax Burden

The tax burden ratio exhibits some volatility over the five-year period. It increased significantly from 0.74 in 2020 to 1.69 in 2021, followed by a decline to 0.86 in 2022. Subsequently, it stabilized around 0.91-0.96 in the last two years, indicating a reduction in tax impact on earnings after a peak in 2021.

Interest Burden

The interest burden ratio shows an initial decrease from 0.77 in 2020 to a low of 0.47 in 2021, suggesting a higher interest expense relative to operating income that year. Following 2021, the ratio improved significantly and remained stable around 0.91-0.94 in subsequent years, indicating a reduced interest expense impact on earnings.

EBIT Margin

The EBIT margin experienced a notable decline in 2021, falling from 11.04% in 2020 to 2.45%. However, a marked recovery followed, with EBIT margin improving to 7.11% in 2022, then increasing substantially to 11.76% in 2023 and reaching 14.93% by 2024. This trend reflects stronger operational profitability in the later years.

Asset Turnover

Asset turnover shows a generally positive trend over the period. It rose from 0.62 in 2020 to a peak of 0.97 in 2023, indicating more efficient use of assets to generate sales. There was a slight dip to 0.91 in 2024, but the overall trend remains upward compared to the initial years.

Financial Leverage

Financial leverage decreased steadily from 1.87 in 2020 to 1.45 in 2023, indicating reduced use of debt relative to equity. However, in 2024, leverage increased again to 1.76, suggesting a renewed reliance on debt financing or changes in the capital structure.

Return on Equity (ROE)

The ROE closely reflects the patterns observed in operational metrics. It declined sharply from 7.38% in 2020 to 2.31% in 2021, then recovered to 6.97% in 2022. This was followed by significant growth, with ROE rising to 14.97% in 2023 and further to 19.87% in 2024, indicating improved profitability and efficient management of equity.

Net Profit Margin

The net profit margin demonstrated notable fluctuations over the periods. Starting at 6.32% in 2020, it experienced a significant decline to 1.96% in 2021. Following this dip, there was a strong recovery and consistent growth, reaching 5.55% in 2022, then rising markedly to 10.63% in 2023, and further increasing to 12.47% in 2024. This trend indicates an improving ability to convert revenue into profit, especially evident in the last two years.

Asset Turnover

Asset turnover showed a generally positive trend over the five-year period, moving from 0.62 in 2020 to a peak of 0.97 in 2023. There was an initial gradual increase from 0.62 to 0.65 and then a more pronounced rise to 0.79 in 2022. However, a slight decrease to 0.91 was observed in 2024. These values suggest an improving efficiency in utilizing assets to generate sales, although the slight decline in the latest period may warrant further attention.

Return on Assets (ROA)

The return on assets followed a pattern similar to the net profit margin, reflecting fluctuations with an overall upward trajectory. Starting at 3.95% in 2020, ROA fell to its lowest point of 1.28% in 2021. It then showed a robust recovery, increasing to 4.4% in 2022, and experiencing significant growth to 10.33% in 2023 and 11.31% in 2024. This improvement signals enhanced profitability relative to the company’s asset base, consistent with better net profitability and asset utilization.

Summary of Trends

Across all key metrics—net profit margin, asset turnover, and return on assets—there is evidence of recovery and improvement following a downturn in 2021. The strong increases from 2022 onwards highlight enhanced operational efficiency and profitability. The plateau or slight dip in asset turnover in the most recent period suggests a potential area for focused management review to sustain momentum. Overall, the data reflects a positive financial performance trajectory with increased capacity to generate profit from assets and revenues.

Tax Burden

The tax burden ratio exhibits volatility over the five-year period. It increased significantly from 0.74 in 2020 to 1.69 in 2021, indicating a potential tax benefit or an unusual tax event in that year. Subsequently, the ratio decreased toward 0.91 in 2024, suggesting a normalization or stabilization in the tax expense relative to earnings.

Interest Burden

This ratio declined from 0.77 in 2020 to a low of 0.47 in 2021, reflecting higher interest expenses or reduced earnings before interest and taxes in that period. From 2022 onwards, it recovered and stabilized around 0.9, indicating improved efficiency in managing interest costs relative to operating income.

EBIT Margin

The EBIT margin shows a marked improvement after a significant drop in 2021. It fell sharply from 11.04% in 2020 to 2.45% in 2021, then progressively increased to reach 14.93% by 2024. This trend suggests enhanced operating profitability and effective cost control in the latter years.

Asset Turnover

Asset turnover increased steadily from 0.62 in 2020 to a peak of 0.97 in 2023, indicating improved efficiency in the use of assets to generate sales. There was a slight decline to 0.91 in 2024, but the level remains substantially above the initial years, highlighting sustained operational effectiveness.

Return on Assets (ROA)

ROA followed a similar trend to EBIT margin, dropping from 3.95% in 2020 to 1.28% in 2021, then strengthening sharply in subsequent years to reach 11.31% in 2024. This reflects an overall enhancement in profitability relative to asset base, driven by improved operational margins and asset utilization.

The financial data reveals several notable trends over the five-year period ending March 31, 2024, related to profitability and operational efficiency.

Tax Burden

The tax burden ratio exhibits some volatility, starting at 0.74 in 2020 and peaking sharply at 1.69 in 2021 before settling at moderate levels around 0.86 to 0.96 in the subsequent years. By 2024, it slightly decreases to 0.91. This pattern suggests fluctuations in the effective tax rate impacting net income differently year over year.

Interest Burden

Interest burden shows initial decline from 0.77 in 2020 to 0.47 in 2021, indicating reduced interest expenses relative to earnings before interest and taxes (EBIT). It then recovers to above 0.90 from 2022 onwards, stabilizing around 0.92 by 2024. This trend reflects improved control or lower financing costs compared to early in the period, followed by consistent interest expenses relative to EBIT.

EBIT Margin

The EBIT margin experienced a significant decline from 11.04% in 2020 to a low of 2.45% in 2021, implying a sharp reduction in operating profitability. However, there is a strong recovery over the next three years, reaching 14.93% by 2024, which is the highest in the five-year span. This indicates improved operational efficiency and better cost management driving higher earnings before interest and taxes.

Net Profit Margin

Similar to EBIT margin, net profit margin declined from 6.32% in 2020 to 1.96% in 2021, reflecting the impact of the various burdens on bottom-line profitability. It then increased steadily, achieving 12.47% in 2024. This continuous improvement suggests enhanced profitability after accounting for all expenses, with the 2024 figure nearly doubling the 2020 margin.

Overall, the data highlight a challenging year in 2021 with lower profitability and elevated effective tax rates, followed by a recovery phase marked by better operational performance, stable interest costs, and improved after-tax earnings through 2024. The margins’ upward trajectory in recent years points toward strengthening financial health and operational leverage.